Correlation Between Focus Home and Sea

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

By analyzing existing cross correlation between Focus Home Interactive and Sea Limited, you can compare the effects of market volatilities on Focus Home and Sea 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 Focus Home with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and Sea.

Diversification Opportunities for Focus Home and Sea

-0.44

Correlation Coefficient

Focus Home  Sea

Very good diversification

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

Pair Corralation between Focus Home and Sea

Assuming the 90 days horizon Focus Home Interactive is expected to generate 2.73 times more return on investment than Sea. However, Focus Home is 2.73 times more volatile than Sea Limited. It trades about 0.09 of its potential returns per unit of risk. Sea Limited is currently generating about -0.3 per unit of risk. If you would invest  2,140  in Focus Home Interactive on October 6, 2024 and sell it today you would earn a total of  110.00  from holding Focus Home Interactive or generate 5.14% return on investment over 90 days.

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

Focus Home Interactive  vs.  Sea Limited

Focus Home Interactive

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Home Interactive are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Focus Home may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sea Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Home and Sea

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

The idea behind Focus Home Interactive and Sea Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.