Correlation Between SE Education and AddTech Hub

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

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

Diversification Opportunities for SE Education and AddTech Hub

0.35

Correlation Coefficient

SE Education  AddTech Hub

Weak diversification

The 3 months correlation between SE-ED and AddTech is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SE Education Public and AddTech Hub Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AddTech Hub Public and SE Education 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 SE Education Public are associated (or correlated) with AddTech Hub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AddTech Hub Public has no effect on the direction of SE Education i.e., SE Education and AddTech Hub go up and down completely randomly.

Pair Corralation between SE Education and AddTech Hub

Assuming the 90 days trading horizon SE Education is expected to generate 96.26 times less return on investment than AddTech Hub. But when comparing it to its historical volatility, SE Education Public is 1.95 times less risky than AddTech Hub. It trades about 0.01 of its potential returns per unit of risk. AddTech Hub Public is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  466.00  in AddTech Hub Public on October 1, 2024 and sell it today you would earn a total of  59.00  from holding AddTech Hub Public or generate 12.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

SE Education Public  vs.  AddTech Hub Public

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 latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AddTech Hub Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AddTech Hub Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, AddTech Hub may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SE Education and AddTech Hub

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

The idea behind SE Education Public and AddTech Hub 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.

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.