Correlation Between Episil Holding and Scientech Corp

Can any of the company-specific risk be diversified away by investing in both Episil Holding and Scientech Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Episil Holding and Scientech Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Episil Holding and Scientech Corp, you can compare the effects of market volatilities on Episil Holding and Scientech Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Episil Holding with a short position of Scientech Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Episil Holding and Scientech Corp.

Diversification Opportunities for Episil Holding and Scientech Corp

0.48

Correlation Coefficient

Episil Holding  Scientech Corp

Very weak diversification

The 3 months correlation between Episil and Scientech is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Episil Holding and Scientech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientech Corp and Episil Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Episil Holding are associated (or correlated) with Scientech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientech Corp has no effect on the direction of Episil Holding i.e., Episil Holding and Scientech Corp go up and down completely randomly.

Pair Corralation between Episil Holding and Scientech Corp

Assuming the 90 days trading horizon Episil Holding is expected to generate 0.94 times more return on investment than Scientech Corp. However, Episil Holding is 1.07 times less risky than Scientech Corp. It trades about 0.05 of its potential returns per unit of risk. Scientech Corp is currently generating about -0.01 per unit of risk. If you would invest  6,820  in Episil Holding on February 2, 2024 and sell it today you would earn a total of  190.00  from holding Episil Holding or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Episil Holding  vs.  Scientech Corp

Episil Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Episil Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Episil Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Scientech Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scientech Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Scientech Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Episil Holding and Scientech Corp

The main advantage of trading using opposite Episil Holding and Scientech Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Episil Holding position performs unexpectedly, Scientech Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Scientech Corp will offset losses from the drop in Scientech Corp's long position.

The idea behind Episil Holding and Scientech Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .