Correlation Between Seah Steel and Newtree CoLtd

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

Diversification Opportunities for Seah Steel and Newtree CoLtd

0.08

Correlation Coefficient

Seah Steel  Newtree CoLtd

Significant diversification

The 3 months correlation between Seah and Newtree is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Newtree CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtree CoLtd 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 Newtree CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtree CoLtd has no effect on the direction of Seah Steel i.e., Seah Steel and Newtree CoLtd go up and down completely randomly.

Pair Corralation between Seah Steel and Newtree CoLtd

Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 1.49 times more return on investment than Newtree CoLtd. However, Seah Steel is 1.49 times more volatile than Newtree CoLtd. It trades about 0.31 of its potential returns per unit of risk. Newtree CoLtd is currently generating about -0.06 per unit of risk. If you would invest  11,740,000  in Seah Steel Corp on December 11, 2024 and sell it today you would earn a total of  7,770,000  from holding Seah Steel Corp or generate 66.18% return on investment over 90 days.

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

Seah Steel Corp  vs.  Newtree CoLtd

Seah Steel Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Newtree CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newtree CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Seah Steel and Newtree CoLtd

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

The idea behind Seah Steel Corp and Newtree CoLtd 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.