Correlation Between NI Holdings and Sea

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

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

Diversification Opportunities for NI Holdings and Sea

-0.48

Correlation Coefficient

NI Holdings  Sea

Very good diversification

The 3 months correlation between NODK and Sea is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Sea go up and down completely randomly.

Pair Corralation between NI Holdings and Sea

Given the investment horizon of 90 days NI Holdings is expected to under-perform the Sea. But the stock apears to be less risky and, when comparing its historical volatility, NI Holdings is 2.07 times less risky than Sea. The stock trades about -0.24 of its potential returns per unit of risk. The Sea is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  12,190  in Sea on December 5, 2024 and sell it today you would earn a total of  1,041  from holding Sea or generate 8.54% return on investment over 90 days.

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

NI Holdings  vs.  Sea

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings 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 fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 8 (%) 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 NI Holdings and Sea

The main advantage of trading using opposite NI Holdings and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.