Correlation Between SC and OPEN
Can any of the company-specific risk be diversified away by investing in both SC and OPEN 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 SC and OPEN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SC and OPEN, you can compare the effects of market volatilities on SC and OPEN 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 SC with a short position of OPEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SC and OPEN.
Diversification Opportunities for SC and OPEN
Very good diversification
The 3 months correlation between SC and OPEN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SC and OPEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPEN and SC 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 SC are associated (or correlated) with OPEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPEN has no effect on the direction of SC i.e., SC and OPEN go up and down completely randomly.
Pair Corralation between SC and OPEN
Assuming the 90 days horizon SC is expected to under-perform the OPEN. But the crypto coin apears to be less risky and, when comparing its historical volatility, SC is 38.93 times less risky than OPEN. The crypto coin trades about -0.18 of its potential returns per unit of risk. The OPEN is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 0.05 in OPEN on February 7, 2024 and sell it today you would earn a total of 4.00 from holding OPEN or generate 8781.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
SC vs. OPEN
Performance |
Timeline |
SC |
OPEN |
SC and OPEN Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SC and OPEN
The main advantage of trading using opposite SC and OPEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SC position performs unexpectedly, OPEN 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 OPEN will offset losses from the drop in OPEN's long position.The idea behind SC and OPEN 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.Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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