Correlation Between Sesoda Corp and Newretail

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

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

Diversification Opportunities for Sesoda Corp and Newretail

0.25

Correlation Coefficient

Sesoda Corp  Newretail

Modest diversification

The 3 months correlation between Sesoda and Newretail is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sesoda Corp and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Sesoda Corp 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 Sesoda Corp are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Sesoda Corp i.e., Sesoda Corp and Newretail go up and down completely randomly.

Pair Corralation between Sesoda Corp and Newretail

Assuming the 90 days trading horizon Sesoda Corp is expected to under-perform the Newretail. But the stock apears to be less risky and, when comparing its historical volatility, Sesoda Corp is 1.31 times less risky than Newretail. The stock trades about -0.39 of its potential returns per unit of risk. The Newretail Co is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,630  in Newretail Co on September 19, 2024 and sell it today you would lose (230.00) from holding Newretail Co or give up 8.75% of portfolio value over 90 days.

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

Sesoda Corp  vs.  Newretail Co

Sesoda Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sesoda Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Newretail

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sesoda Corp and Newretail

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

The idea behind Sesoda Corp and Newretail Co 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.