Correlation Between UNIVMUSIC GRPADR/050 and Sea

Can any of the company-specific risk be diversified away by investing in both UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR/050 and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNIVMUSIC GRPADR050 and Sea Limited, you can compare the effects of market volatilities on UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR/050 with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNIVMUSIC GRPADR/050 and Sea.

Diversification Opportunities for UNIVMUSIC GRPADR/050 and Sea

-0.02

Correlation Coefficient

UNIVMUSIC GRPADR/050  Sea

Good diversification

The 3 months correlation between UNIVMUSIC and Sea is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding UNIVMUSIC GRPADR050 and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited and UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR050 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 UNIVMUSIC GRPADR/050 i.e., UNIVMUSIC GRPADR/050 and Sea go up and down completely randomly.

Pair Corralation between UNIVMUSIC GRPADR/050 and Sea

Assuming the 90 days trading horizon UNIVMUSIC GRPADR/050 is expected to generate 3.2 times less return on investment than Sea. But when comparing it to its historical volatility, UNIVMUSIC GRPADR050 is 2.04 times less risky than Sea. It trades about 0.11 of its potential returns per unit of risk. Sea Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,720  in Sea Limited on October 6, 2024 and sell it today you would earn a total of  1,540  from holding Sea Limited or generate 17.66% return on investment over 90 days.

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

UNIVMUSIC GRPADR050  vs.  Sea Limited

UNIVMUSIC GRPADR/050

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVMUSIC GRPADR050 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, UNIVMUSIC GRPADR/050 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNIVMUSIC GRPADR/050 and Sea

The main advantage of trading using opposite UNIVMUSIC GRPADR/050 and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIVMUSIC GRPADR/050 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 UNIVMUSIC GRPADR050 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.