Correlation Between FREY EO and SERITAGE GWTH
Can any of the company-specific risk be diversified away by investing in both FREY EO and SERITAGE GWTH 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 FREY EO and SERITAGE GWTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FREY EO 250 and SERITAGE GWTH PRA, you can compare the effects of market volatilities on FREY EO and SERITAGE GWTH 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 FREY EO with a short position of SERITAGE GWTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREY EO and SERITAGE GWTH.
Diversification Opportunities for FREY EO and SERITAGE GWTH
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FREY and SERITAGE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding FREY EO 250 and SERITAGE GWTH PRA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERITAGE GWTH PRA and FREY EO 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 FREY EO 250 are associated (or correlated) with SERITAGE GWTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERITAGE GWTH PRA has no effect on the direction of FREY EO i.e., FREY EO and SERITAGE GWTH go up and down completely randomly.
Pair Corralation between FREY EO and SERITAGE GWTH
Assuming the 90 days horizon FREY EO 250 is expected to under-perform the SERITAGE GWTH. But the stock apears to be less risky and, when comparing its historical volatility, FREY EO 250 is 1.82 times less risky than SERITAGE GWTH. The stock trades about -0.16 of its potential returns per unit of risk. The SERITAGE GWTH PRA is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 380.00 in SERITAGE GWTH PRA on September 1, 2024 and sell it today you would earn a total of 48.00 from holding SERITAGE GWTH PRA or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FREY EO 250 vs. SERITAGE GWTH PRA
Performance |
| Timeline |
| FREY EO 250 |
| SERITAGE GWTH PRA |
FREY EO and SERITAGE GWTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FREY EO and SERITAGE GWTH
The main advantage of trading using opposite FREY EO and SERITAGE GWTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREY EO position performs unexpectedly, SERITAGE GWTH 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 SERITAGE GWTH will offset losses from the drop in SERITAGE GWTH's long position.The idea behind FREY EO 250 and SERITAGE GWTH PRA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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