Correlation Between Sea and XIAO I

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

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

Diversification Opportunities for Sea and XIAO I

0.27

Correlation Coefficient

Sea  XIAO I

Modest diversification

The 3 months correlation between Sea and XIAO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sea and XIAO I American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XIAO I American and Sea 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 Sea are associated (or correlated) with XIAO I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XIAO I American has no effect on the direction of Sea i.e., Sea and XIAO I go up and down completely randomly.

Pair Corralation between Sea and XIAO I

Allowing for the 90-day total investment horizon Sea is expected to generate 0.31 times more return on investment than XIAO I. However, Sea is 3.26 times less risky than XIAO I. It trades about 0.21 of its potential returns per unit of risk. XIAO I American is currently generating about -0.17 per unit of risk. If you would invest  10,965  in Sea on October 26, 2024 and sell it today you would earn a total of  757.00  from holding Sea or generate 6.9% return on investment over 90 days.

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

Sea  vs.  XIAO I American

Sea

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

XIAO I American

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XIAO I American are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, XIAO I demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and XIAO I

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

The idea behind Sea and XIAO I American 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.