Correlation Between Standard and SES AI
Can any of the company-specific risk be diversified away by investing in both Standard and SES AI 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 Standard and SES AI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and SES AI Corp, you can compare the effects of market volatilities on Standard and SES AI 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 Standard with a short position of SES AI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and SES AI.
Diversification Opportunities for Standard and SES AI
Good diversification
The 3 months correlation between Standard and SES is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and SES AI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SES AI Corp and Standard 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 Standard Motor Products are associated (or correlated) with SES AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SES AI Corp has no effect on the direction of Standard i.e., Standard and SES AI go up and down completely randomly.
Pair Corralation between Standard and SES AI
Considering the 90-day investment horizon Standard Motor Products is expected to generate 0.65 times more return on investment than SES AI. However, Standard Motor Products is 1.55 times less risky than SES AI. It trades about 0.12 of its potential returns per unit of risk. SES AI Corp is currently generating about -0.47 per unit of risk. If you would invest 2,889 in Standard Motor Products on August 23, 2024 and sell it today you would earn a total of 328.00 from holding Standard Motor Products or generate 11.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. SES AI Corp
Performance |
| Timeline |
| Standard Motor Products |
| SES AI Corp |
Standard and SES AI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and SES AI
The main advantage of trading using opposite Standard and SES AI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard position performs unexpectedly, SES AI 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 SES AI will offset losses from the drop in SES AI's long position.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
| SES AI vs. Cooper Stnd | SES AI vs. Motorcar Parts of | SES AI vs. American Axle Manufacturing | SES AI vs. Stoneridge |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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