Correlation Between Financial and Sego Resources

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

By analyzing existing cross correlation between Financial 15 Split and Sego Resources, you can compare the effects of market volatilities on Financial and Sego Resources 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 Financial with a short position of Sego Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Sego Resources.

Diversification Opportunities for Financial and Sego Resources

-0.27

Correlation Coefficient

Financial  Sego Resources

Very good diversification

The 3 months correlation between Financial and Sego is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Sego Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sego Resources and Financial 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 Financial 15 Split are associated (or correlated) with Sego Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sego Resources has no effect on the direction of Financial i.e., Financial and Sego Resources go up and down completely randomly.

Pair Corralation between Financial and Sego Resources

Assuming the 90 days trading horizon Financial is expected to generate 19.59 times less return on investment than Sego Resources. But when comparing it to its historical volatility, Financial 15 Split is 54.08 times less risky than Sego Resources. It trades about 0.63 of its potential returns per unit of risk. Sego Resources is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sego Resources on October 12, 2024 and sell it today you would earn a total of  1.00  from holding Sego Resources or generate 50.0% return on investment over 90 days.

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

Financial 15 Split  vs.  Sego Resources

Financial 15 Split

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sego Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sego Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sego Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Sego Resources

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

The idea behind Financial 15 Split and Sego Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.