Correlation Between Sea Sonic and Excellence Optoelectronic

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

By analyzing existing cross correlation between Sea Sonic Electronics and Excellence Optoelectronic, you can compare the effects of market volatilities on Sea Sonic and Excellence Optoelectronic 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 Sea Sonic with a short position of Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea Sonic and Excellence Optoelectronic.

Diversification Opportunities for Sea Sonic and Excellence Optoelectronic

-0.48

Correlation Coefficient

Sea Sonic  Excellence Optoelectronic

Very good diversification

The 3 months correlation between Sea and Excellence is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sea Sonic Electronics and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and Sea Sonic 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 Sea Sonic Electronics are associated (or correlated) with Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Sea Sonic i.e., Sea Sonic and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between Sea Sonic and Excellence Optoelectronic

Assuming the 90 days trading horizon Sea Sonic Electronics is expected to generate 0.91 times more return on investment than Excellence Optoelectronic. However, Sea Sonic Electronics is 1.1 times less risky than Excellence Optoelectronic. It trades about 0.04 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.03 per unit of risk. If you would invest  4,892  in Sea Sonic Electronics on October 4, 2024 and sell it today you would earn a total of  2,038  from holding Sea Sonic Electronics or generate 41.66% return on investment over 90 days.

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

Sea Sonic Electronics  vs.  Excellence Optoelectronic

Sea Sonic Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sea Sonic Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sea Sonic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Excellence Optoelectronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excellence Optoelectronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Excellence Optoelectronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sea Sonic and Excellence Optoelectronic

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

The idea behind Sea Sonic Electronics and Excellence Optoelectronic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.