Correlation Between Sea and System1
Can any of the company-specific risk be diversified away by investing in both Sea and System1 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 System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and System1, you can compare the effects of market volatilities on Sea and System1 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 System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and System1.
Diversification Opportunities for Sea and System1
Very good diversification
The 3 months correlation between Sea and System1 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sea and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 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 are associated (or correlated) with System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of Sea i.e., Sea and System1 go up and down completely randomly.
Pair Corralation between Sea and System1
Allowing for the 90-day total investment horizon Sea is expected to generate 0.19 times more return on investment than System1. However, Sea is 5.41 times less risky than System1. It trades about 0.39 of its potential returns per unit of risk. System1 is currently generating about -0.13 per unit of risk. If you would invest 10,642 in Sea on November 8, 2024 and sell it today you would earn a total of 1,666 from holding Sea or generate 15.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. System1
Performance |
| Timeline |
| Sea |
| System1 |
Sea and System1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and System1
The main advantage of trading using opposite Sea and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.The idea behind Sea and System1 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.| System1 vs. Network 1 Technologies | System1 vs. Maximus | System1 vs. Civeo Corp | System1 vs. Rentokil Initial PLC |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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