Correlation Between Ping An and Sea

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

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

Diversification Opportunities for Ping An and Sea

0.42

Correlation Coefficient

Ping An  Sea

Very weak diversification

The 3 months correlation between Ping and Sea is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited and Ping An 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 Ping An Insurance 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 Limited has no effect on the direction of Ping An i.e., Ping An and Sea go up and down completely randomly.

Pair Corralation between Ping An and Sea

Assuming the 90 days trading horizon Ping An is expected to generate 15.33 times less return on investment than Sea. But when comparing it to its historical volatility, Ping An Insurance is 1.21 times less risky than Sea. It trades about 0.01 of its potential returns per unit of risk. Sea Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,380  in Sea Limited on December 27, 2024 and sell it today you would earn a total of  1,600  from holding Sea Limited or generate 15.41% return on investment over 90 days.

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

Ping An Insurance  vs.  Sea Limited

Ping An Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ping An is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sea Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Sea

The main advantage of trading using opposite Ping An and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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 Ping An Insurance and Sea Limited 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.