Correlation Between Sea and Global Partners

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

By analyzing existing cross correlation between Sea and Global Partners LP, you can compare the effects of market volatilities on Sea and Global Partners 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 Global Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Global Partners.

Diversification Opportunities for Sea and Global Partners

0.85

Correlation Coefficient

Sea  Global Partners

Very poor diversification

The 3 months correlation between Sea and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Sea i.e., Sea and Global Partners go up and down completely randomly.

Pair Corralation between Sea and Global Partners

Allowing for the 90-day total investment horizon Sea is expected to generate 8.94 times more return on investment than Global Partners. However, Sea is 8.94 times more volatile than Global Partners LP. It trades about 0.15 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.16 per unit of risk. If you would invest  9,067  in Sea on September 22, 2024 and sell it today you would earn a total of  1,997  from holding Sea or generate 22.02% return on investment over 90 days.

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

Sea  vs.  Global Partners LP

Sea

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 11 (%) 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.

Global Partners LP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sea and Global Partners

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

The idea behind Sea and Global Partners LP 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..