Correlation Between Sea and SPORTING

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Can any of the company-specific risk be diversified away by investing in both Sea and SPORTING 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 Sea and SPORTING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea Limited and SPORTING, you can compare the effects of market volatilities on Sea and SPORTING 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 Sea with a short position of SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and SPORTING.

Diversification Opportunities for Sea and SPORTING

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sea and SPORTING is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and Sea 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 Sea Limited are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Sea i.e., Sea and SPORTING go up and down completely randomly.

Pair Corralation between Sea and SPORTING

Assuming the 90 days horizon Sea Limited is expected to generate 4.87 times more return on investment than SPORTING. However, Sea is 4.87 times more volatile than SPORTING. It trades about 0.13 of its potential returns per unit of risk. SPORTING is currently generating about 0.21 per unit of risk. If you would invest  10,140  in Sea Limited on September 13, 2024 and sell it today you would earn a total of  520.00  from holding Sea Limited or generate 5.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sea Limited  vs.  SPORTING

 Performance 
       Timeline  
Sea Limited 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.
SPORTING 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SPORTING may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sea and SPORTING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sea and SPORTING

The main advantage of trading using opposite Sea and SPORTING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, SPORTING 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 SPORTING will offset losses from the drop in SPORTING's long position.
The idea behind Sea Limited and SPORTING 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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