Correlation Between Seoam Machinery and Microfriend

Can any of the company-specific risk be diversified away by investing in both Seoam Machinery and Microfriend 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 Microfriend 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 Microfriend, you can compare the effects of market volatilities on Seoam Machinery and Microfriend 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 Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoam Machinery and Microfriend.

Diversification Opportunities for Seoam Machinery and Microfriend

0.44

Correlation Coefficient

Seoam Machinery  Microfriend

Very weak diversification

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

Pair Corralation between Seoam Machinery and Microfriend

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to generate 0.76 times more return on investment than Microfriend. However, Seoam Machinery Industry is 1.32 times less risky than Microfriend. It trades about 0.02 of its potential returns per unit of risk. Microfriend is currently generating about -0.16 per unit of risk. If you would invest  373,294  in Seoam Machinery Industry on October 26, 2024 and sell it today you would earn a total of  5,206  from holding Seoam Machinery Industry or generate 1.39% return on investment over 90 days.

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

Seoam Machinery Industry  vs.  Microfriend

Seoam Machinery Industry

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seoam Machinery Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seoam Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Seoam Machinery and Microfriend

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

The idea behind Seoam Machinery Industry and Microfriend 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.