Correlation Between Fox Factory and SES AI

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

By analyzing existing cross correlation between Fox Factory Holding and SES AI Corp, you can compare the effects of market volatilities on Fox Factory and SES AI 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 Fox Factory with a short position of SES AI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fox Factory and SES AI.

Diversification Opportunities for Fox Factory and SES AI

0.77

Correlation Coefficient

Fox Factory  SES AI

Poor diversification

The 3 months correlation between Fox and SES is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fox Factory Holding and SES AI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SES AI Corp and Fox Factory 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 Fox Factory Holding are associated (or correlated) with SES AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SES AI Corp has no effect on the direction of Fox Factory i.e., Fox Factory and SES AI go up and down completely randomly.

Pair Corralation between Fox Factory and SES AI

Given the investment horizon of 90 days Fox Factory Holding is expected to under-perform the SES AI. But the stock apears to be less risky and, when comparing its historical volatility, Fox Factory Holding is 3.44 times less risky than SES AI. The stock trades about -0.06 of its potential returns per unit of risk. The SES AI Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  32.00  in SES AI Corp on September 15, 2024 and sell it today you would earn a total of  9.00  from holding SES AI Corp or generate 28.13% return on investment over 90 days.

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

Fox Factory Holding  vs.  SES AI Corp

Fox Factory Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fox Factory Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SES AI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SES AI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fox Factory and SES AI

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

The idea behind Fox Factory Holding and SES AI Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.