Correlation Between Sea and Wayside Technology

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

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

Diversification Opportunities for Sea and Wayside Technology

0.94

Correlation Coefficient

Sea  Wayside Technology

Almost no diversification

The 3 months correlation between Sea and Wayside is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology and Sea 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 Limited are associated (or correlated) with Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of Sea i.e., Sea and Wayside Technology go up and down completely randomly.

Pair Corralation between Sea and Wayside Technology

Assuming the 90 days horizon Sea Limited is expected to under-perform the Wayside Technology. But the stock apears to be less risky and, when comparing its historical volatility, Sea Limited is 2.41 times less risky than Wayside Technology. The stock trades about -0.26 of its potential returns per unit of risk. The Wayside Technology Group is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  12,800  in Wayside Technology Group on October 7, 2024 and sell it today you would lose (600.00) from holding Wayside Technology Group or give up 4.69% of portfolio value over 90 days.

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

Sea Limited  vs.  Wayside Technology Group

Sea Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Wayside Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and Wayside Technology

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

The idea behind Sea Limited and Wayside Technology Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.