Correlation Between Trimble and Science Applications

Can any of the company-specific risk be diversified away by investing in both Trimble and Science Applications 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 Trimble and Science Applications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trimble and Science Applications International, you can compare the effects of market volatilities on Trimble and Science Applications 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 Trimble with a short position of Science Applications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trimble and Science Applications.

Diversification Opportunities for Trimble and Science Applications

0.36

Correlation Coefficient

Trimble  Science Applications

Weak diversification

The 3 months correlation between Trimble and Science is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications and Trimble 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 Trimble are associated (or correlated) with Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Trimble i.e., Trimble and Science Applications go up and down completely randomly.

Pair Corralation between Trimble and Science Applications

Given the investment horizon of 90 days Trimble is expected to under-perform the Science Applications. In addition to that, Trimble is 1.01 times more volatile than Science Applications International. It trades about -0.35 of its total potential returns per unit of risk. Science Applications International is currently generating about -0.1 per unit of volatility. If you would invest  12,663  in Science Applications International on January 20, 2024 and sell it today you would lose (345.00) from holding Science Applications International or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Trimble  vs.  Science Applications Internati

Trimble

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Science Applications is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Trimble and Science Applications

The main advantage of trading using opposite Trimble and Science Applications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble position performs unexpectedly, Science Applications 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 Science Applications will offset losses from the drop in Science Applications' long position.

The idea behind Trimble and Science Applications International 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.