Correlation Between Genie Music and Seoam Machinery

Can any of the company-specific risk be diversified away by investing in both Genie Music and Seoam Machinery 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 Genie Music and Seoam Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genie Music and Seoam Machinery Industry, you can compare the effects of market volatilities on Genie Music and Seoam Machinery 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 Genie Music with a short position of Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Music and Seoam Machinery.

Diversification Opportunities for Genie Music and Seoam Machinery

0.44

Correlation Coefficient

Genie Music  Seoam Machinery

Very weak diversification

The 3 months correlation between Genie and Seoam is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Genie Music and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and Genie Music 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 Genie Music are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Genie Music i.e., Genie Music and Seoam Machinery go up and down completely randomly.

Pair Corralation between Genie Music and Seoam Machinery

Assuming the 90 days trading horizon Genie Music is expected to generate 1.03 times more return on investment than Seoam Machinery. However, Genie Music is 1.03 times more volatile than Seoam Machinery Industry. It trades about -0.02 of its potential returns per unit of risk. Seoam Machinery Industry is currently generating about -0.04 per unit of risk. If you would invest  217,500  in Genie Music on September 12, 2024 and sell it today you would lose (20,100) from holding Genie Music or give up 9.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Genie Music  vs.  Seoam Machinery Industry

Genie Music

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Music has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Genie Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Genie Music and Seoam Machinery

The main advantage of trading using opposite Genie Music and Seoam Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie Music position performs unexpectedly, Seoam Machinery 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 Seoam Machinery will offset losses from the drop in Seoam Machinery's long position.

The idea behind Genie Music and Seoam Machinery Industry 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.