Correlation Between Seegene and Pearl Abyss

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

By analyzing existing cross correlation between Seegene and Pearl Abyss Corp, you can compare the effects of market volatilities on Seegene and Pearl Abyss 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 Seegene with a short position of Pearl Abyss. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seegene and Pearl Abyss.

Diversification Opportunities for Seegene and Pearl Abyss

-0.22

Correlation Coefficient

Seegene  Pearl Abyss

Very good diversification

The 3 months correlation between Seegene and Pearl is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Seegene and Pearl Abyss Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearl Abyss Corp and Seegene 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 Seegene are associated (or correlated) with Pearl Abyss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearl Abyss Corp has no effect on the direction of Seegene i.e., Seegene and Pearl Abyss go up and down completely randomly.

Pair Corralation between Seegene and Pearl Abyss

Assuming the 90 days trading horizon Seegene is expected to under-perform the Pearl Abyss. But the stock apears to be less risky and, when comparing its historical volatility, Seegene is 1.31 times less risky than Pearl Abyss. The stock trades about -0.05 of its potential returns per unit of risk. The Pearl Abyss Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,200,000  in Pearl Abyss Corp on September 4, 2024 and sell it today you would earn a total of  685,000  from holding Pearl Abyss Corp or generate 21.41% return on investment over 90 days.

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

Seegene  vs.  Pearl Abyss Corp

Seegene

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pearl Abyss Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pearl Abyss Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pearl Abyss sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seegene and Pearl Abyss

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

The idea behind Seegene and Pearl Abyss Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.