Correlation Between Fwog and Sei

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

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

Diversification Opportunities for Fwog and Sei

0.27

Correlation Coefficient

Fwog  Sei

Modest diversification

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

Pair Corralation between Fwog and Sei

Assuming the 90 days trading horizon Fwog is expected to generate 16.77 times more return on investment than Sei. However, Fwog is 16.77 times more volatile than Sei. It trades about 0.13 of its potential returns per unit of risk. Sei is currently generating about 0.02 per unit of risk. If you would invest  19.00  in Fwog on October 10, 2024 and sell it today you would earn a total of  2.00  from holding Fwog or generate 10.53% return on investment over 90 days.

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

Fwog  vs.  Sei

Fwog

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fwog are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Fwog exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sei

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sei are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Sei may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fwog and Sei

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

The idea behind Fwog and Sei 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.