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
Very good diversification
The 3 months correlation between Standard and SES is -0.45. 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 is expected to generate 216.46 times less return on investment than SES AI. But when comparing it to its historical volatility, Standard Motor Products is 27.84 times less risky than SES AI. It trades about 0.03 of its potential returns per unit of risk. SES AI Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 39.00 in SES AI Corp on October 20, 2024 and sell it today you would earn a total of 54.00 from holding SES AI Corp or generate 138.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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