Correlation Between Randstad Holdings and Seek

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

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

Diversification Opportunities for Randstad Holdings and Seek

0.61

Correlation Coefficient

Randstad Holdings  Seek

Poor diversification

The 3 months correlation between Randstad and Seek is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Randstad Holdings NV and Seek Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seek Ltd ADR and Randstad 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 Randstad Holdings NV are associated (or correlated) with Seek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seek Ltd ADR has no effect on the direction of Randstad Holdings i.e., Randstad Holdings and Seek go up and down completely randomly.

Pair Corralation between Randstad Holdings and Seek

Assuming the 90 days horizon Randstad Holdings NV is expected to under-perform the Seek. But the pink sheet apears to be less risky and, when comparing its historical volatility, Randstad Holdings NV is 1.18 times less risky than Seek. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Seek Ltd ADR is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,182  in Seek Ltd ADR on October 5, 2024 and sell it today you would lose (393.00) from holding Seek Ltd ADR or give up 12.35% of portfolio value over 90 days.

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

Randstad Holdings NV  vs.  Seek Ltd ADR

Randstad Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Randstad Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seek Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seek Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Randstad Holdings and Seek

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

The idea behind Randstad Holdings NV and Seek Ltd ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.