Correlation Between Scout Core and Stet California

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

By analyzing existing cross correlation between Scout E Bond and Stet California Municipal, you can compare the effects of market volatilities on Scout Core and Stet California 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 Scout Core with a short position of Stet California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Core and Stet California.

Diversification Opportunities for Scout Core and Stet California

0.93

Correlation Coefficient

Scout Core  Stet California

Almost no diversification

The 3 months correlation between Scout and Stet is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Scout E Bond and Stet California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet California Municipal and Scout Core 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 Scout E Bond are associated (or correlated) with Stet California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet California Municipal has no effect on the direction of Scout Core i.e., Scout Core and Stet California go up and down completely randomly.

Pair Corralation between Scout Core and Stet California

Assuming the 90 days horizon Scout E Bond is expected to generate 2.71 times more return on investment than Stet California. However, Scout Core is 2.71 times more volatile than Stet California Municipal. It trades about 0.15 of its potential returns per unit of risk. Stet California Municipal is currently generating about 0.37 per unit of risk. If you would invest  1,053  in Scout E Bond on May 10, 2025 and sell it today you would earn a total of  30.00  from holding Scout E Bond or generate 2.85% return on investment over 90 days.

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

Scout E Bond  vs.  Stet California Municipal

Scout E Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scout E Bond are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Scout Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stet California Municipal

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Stet California Municipal are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stet California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scout Core and Stet California

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

The idea behind Scout E Bond and Stet California Municipal 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..