Correlation Between Emetals and Sequoia Financial

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

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

Diversification Opportunities for Emetals and Sequoia Financial

-0.66

Correlation Coefficient

Emetals  Sequoia Financial

Excellent diversification

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

Pair Corralation between Emetals and Sequoia Financial

Assuming the 90 days trading horizon Emetals is expected to generate 1.54 times less return on investment than Sequoia Financial. In addition to that, Emetals is 7.89 times more volatile than Sequoia Financial Group. It trades about 0.04 of its total potential returns per unit of risk. Sequoia Financial Group is currently generating about 0.43 per unit of volatility. If you would invest  38.00  in Sequoia Financial Group on October 22, 2024 and sell it today you would earn a total of  3.00  from holding Sequoia Financial Group or generate 7.89% return on investment over 90 days.

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

Emetals  vs.  Sequoia Financial Group

Emetals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emetals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Emetals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sequoia Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sequoia Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sequoia Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Emetals and Sequoia Financial

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

The idea behind Emetals and Sequoia Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.