Correlation Between Sei and Gas
Can any of the company-specific risk be diversified away by investing in both Sei and Gas 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 Sei and Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sei and Gas, you can compare the effects of market volatilities on Sei and Gas 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 Sei with a short position of Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sei and Gas.
Diversification Opportunities for Sei and Gas
Almost no diversification
The 3 months correlation between Sei and Gas is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sei and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gas and Sei 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 Sei are associated (or correlated) with Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gas has no effect on the direction of Sei i.e., Sei and Gas go up and down completely randomly.
Pair Corralation between Sei and Gas
Assuming the 90 days trading horizon Sei is expected to generate 2.59 times less return on investment than Gas. But when comparing it to its historical volatility, Sei is 1.35 times less risky than Gas. It trades about 0.03 of its potential returns per unit of risk. Gas is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 268.00 in Gas on August 27, 2024 and sell it today you would earn a total of 251.00 from holding Gas or generate 93.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 52.94% |
| Values | Daily Returns |
Sei vs. Gas
Performance |
| Timeline |
| Sei |
| Gas |
Sei and Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sei and Gas
The main advantage of trading using opposite Sei and Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sei position performs unexpectedly, Gas 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 Gas will offset losses from the drop in Gas' long position.The idea behind Sei and Gas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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