Correlation Between Seaboard and ResMed

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

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

Diversification Opportunities for Seaboard and ResMed

-0.71

Correlation Coefficient

Seaboard  ResMed

Pay attention - limited upside

The 3 months correlation between Seaboard and ResMed is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Seaboard 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 Seaboard are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Seaboard i.e., Seaboard and ResMed go up and down completely randomly.

Pair Corralation between Seaboard and ResMed

Assuming the 90 days horizon Seaboard is expected to under-perform the ResMed. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 1.72 times less risky than ResMed. The stock trades about -0.08 of its potential returns per unit of risk. The ResMed Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,845  in ResMed Inc on September 24, 2024 and sell it today you would earn a total of  9,375  from holding ResMed Inc or generate 72.99% return on investment over 90 days.

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

Seaboard  vs.  ResMed Inc

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seaboard and ResMed

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

The idea behind Seaboard and ResMed Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.