Correlation Between Seah Steel and System

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

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

Diversification Opportunities for Seah Steel and System

0.57

Correlation Coefficient

Seah Steel  System

Very weak diversification

The 3 months correlation between Seah and System is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp 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 Seah Steel 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 Seah Steel Corp 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 Seah Steel i.e., Seah Steel and System go up and down completely randomly.

Pair Corralation between Seah Steel and System

Assuming the 90 days trading horizon Seah Steel is expected to generate 2.14 times less return on investment than System. But when comparing it to its historical volatility, Seah Steel Corp is 2.34 times less risky than System. It trades about 0.08 of its potential returns per unit of risk. System and Application is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  140,536  in System and Application on October 6, 2024 and sell it today you would earn a total of  14,964  from holding System and Application or generate 10.65% return on investment over 90 days.

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

Seah Steel Corp  vs.  System and Application

Seah Steel Corp

Risk-Adjusted Performance

1 of 100

Weak

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

System and Application

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Seah Steel and System

The main advantage of trading using opposite Seah Steel and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seah Steel 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 Seah Steel Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.