Correlation Between E Ink and Sea Sonic

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

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

Diversification Opportunities for E Ink and Sea Sonic

-0.27

Correlation Coefficient

E Ink  Sea Sonic

Very good diversification

The 3 months correlation between 8069 and Sea is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding E Ink Holdings and Sea Sonic Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Sonic Electronics and E Ink 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 E Ink Holdings are associated (or correlated) with Sea Sonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Sonic Electronics has no effect on the direction of E Ink i.e., E Ink and Sea Sonic go up and down completely randomly.

Pair Corralation between E Ink and Sea Sonic

Assuming the 90 days trading horizon E Ink Holdings is expected to under-perform the Sea Sonic. But the stock apears to be less risky and, when comparing its historical volatility, E Ink Holdings is 1.2 times less risky than Sea Sonic. The stock trades about -0.08 of its potential returns per unit of risk. The Sea Sonic Electronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,850  in Sea Sonic Electronics on October 23, 2024 and sell it today you would lose (60.00) from holding Sea Sonic Electronics or give up 0.88% of portfolio value over 90 days.

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

E Ink Holdings  vs.  Sea Sonic Electronics

E Ink Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Ink Holdings 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.

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.

Pair Trading with E Ink and Sea Sonic

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

The idea behind E Ink Holdings and Sea Sonic Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.