Correlation Between Douglas Emmett and Sea

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Can any of the company-specific risk be diversified away by investing in both Douglas Emmett and Sea 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 Douglas Emmett and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Emmett and Sea, you can compare the effects of market volatilities on Douglas Emmett and Sea 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 Douglas Emmett with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and Sea.

Diversification Opportunities for Douglas Emmett and Sea

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Douglas and Sea is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Sea go up and down completely randomly.

Pair Corralation between Douglas Emmett and Sea

Considering the 90-day investment horizon Douglas Emmett is expected to under-perform the Sea. But the stock apears to be less risky and, when comparing its historical volatility, Douglas Emmett is 1.1 times less risky than Sea. The stock trades about 0.0 of its potential returns per unit of risk. The Sea is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,585  in Sea on October 10, 2024 and sell it today you would earn a total of  1,350  from holding Sea or generate 14.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Douglas Emmett  vs.  Sea

 Performance 
       Timeline  
Douglas Emmett 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Sea 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Douglas Emmett and Sea Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Douglas Emmett and Sea

The main advantage of trading using opposite Douglas Emmett and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett position performs unexpectedly, Sea 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 will offset losses from the drop in Sea's long position.
The idea behind Douglas Emmett and Sea 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.
Check out your portfolio center.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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