Correlation Between Seoam Machinery and System

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

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

Diversification Opportunities for Seoam Machinery and System

0.12

Correlation Coefficient

Seoam Machinery  System

Average diversification

The 3 months correlation between Seoam and System is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Seoam Machinery Industry and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application and Seoam Machinery 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 Seoam Machinery Industry are associated (or correlated) with System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of Seoam Machinery i.e., Seoam Machinery and System go up and down completely randomly.

Pair Corralation between Seoam Machinery and System

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to under-perform the System. But the stock apears to be less risky and, when comparing its historical volatility, Seoam Machinery Industry is 1.23 times less risky than System. The stock trades about -0.03 of its potential returns per unit of risk. The System and Application is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  215,551  in System and Application on October 25, 2024 and sell it today you would lose (59,051) from holding System and Application or give up 27.4% of portfolio value over 90 days.

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

Seoam Machinery Industry  vs.  System and Application

Seoam Machinery Industry

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seoam Machinery Industry are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoam Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

System and Application

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seoam Machinery and System

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

The idea behind Seoam Machinery Industry and System and Application 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.