Correlation Between Regional Container and SE Education

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

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

Diversification Opportunities for Regional Container and SE Education

-0.53

Correlation Coefficient

Regional Container  SE Education

Excellent diversification

The 3 months correlation between Regional and SE-ED is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and SE Education Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SE Education Public and Regional Container 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 Regional Container Lines are associated (or correlated) with SE Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SE Education Public has no effect on the direction of Regional Container i.e., Regional Container and SE Education go up and down completely randomly.

Pair Corralation between Regional Container and SE Education

Assuming the 90 days trading horizon Regional Container Lines is expected to generate 1.88 times more return on investment than SE Education. However, Regional Container is 1.88 times more volatile than SE Education Public. It trades about 0.12 of its potential returns per unit of risk. SE Education Public is currently generating about -0.02 per unit of risk. If you would invest  2,375  in Regional Container Lines on October 5, 2024 and sell it today you would earn a total of  450.00  from holding Regional Container Lines or generate 18.95% return on investment over 90 days.

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

Regional Container Lines  vs.  SE Education Public

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Regional Container disclosed solid returns over the last few months and may actually be approaching a breakup point.

SE Education Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SE Education Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, SE Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Regional Container and SE Education

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

The idea behind Regional Container Lines and SE Education Public 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.