Correlation Between Farfetch and Sea

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

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

Diversification Opportunities for Farfetch and Sea

0.0

Correlation Coefficient

Farfetch  Sea

Pay attention - limited upside

The 3 months correlation between Farfetch and Sea is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Farfetch Ltd Class and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Farfetch 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 Farfetch Ltd Class 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 Farfetch i.e., Farfetch and Sea go up and down completely randomly.

Pair Corralation between Farfetch and Sea

If you would invest  10,748  in Sea on December 28, 2024 and sell it today you would earn a total of  2,609  from holding Sea or generate 24.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Farfetch Ltd Class  vs.  Sea

Farfetch Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Farfetch Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Farfetch is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Sea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 11 (%) 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.

Pair Trading with Farfetch and Sea

The main advantage of trading using opposite Farfetch and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farfetch 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 Farfetch Ltd Class 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.