Correlation Between Electro Optic and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Electro Optic and Sembcorp Marine 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 Electro Optic and Sembcorp Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electro Optic Systems and Sembcorp Marine, you can compare the effects of market volatilities on Electro Optic and Sembcorp Marine 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 Electro Optic with a short position of Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electro Optic and Sembcorp Marine.
Diversification Opportunities for Electro Optic and Sembcorp Marine
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Electro and Sembcorp is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Electro Optic Systems and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine and Electro Optic 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 Electro Optic Systems are associated (or correlated) with Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Electro Optic i.e., Electro Optic and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Electro Optic and Sembcorp Marine
Assuming the 90 days horizon Electro Optic is expected to generate 198.32 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, Electro Optic Systems is 51.78 times less risky than Sembcorp Marine. It trades about 0.06 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Sembcorp Marine on August 27, 2024 and sell it today you would earn a total of 129.00 from holding Sembcorp Marine or generate 1172.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 78.68% |
| Values | Daily Returns |
Electro Optic Systems vs. Sembcorp Marine
Performance |
| Timeline |
| Electro Optic Systems |
| Sembcorp Marine |
Electro Optic and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electro Optic and Sembcorp Marine
The main advantage of trading using opposite Electro Optic and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electro Optic position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| Electro Optic vs. Moog Inc | Electro Optic vs. BAE Systems PLC | Electro Optic vs. Park Electrochemical | Electro Optic vs. Triumph Group |
| Sembcorp Marine vs. Moog Inc | Sembcorp Marine vs. BAE Systems PLC | Sembcorp Marine vs. Park Electrochemical | Sembcorp Marine vs. Triumph Group |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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