Correlation Between Sea and IXE Select

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

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

Diversification Opportunities for Sea and IXE Select

0.06

Correlation Coefficient

Sea  IXE Select

Significant diversification

The 3 months correlation between Sea and IXE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sea and IXE Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXE Select Sector 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 IXE Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXE Select Sector has no effect on the direction of Sea i.e., Sea and IXE Select go up and down completely randomly.

Pair Corralation between Sea and IXE Select

Allowing for the 90-day total investment horizon Sea is expected to generate 1.09 times less return on investment than IXE Select. In addition to that, Sea is 1.97 times more volatile than IXE Select Sector. It trades about 0.24 of its total potential returns per unit of risk. IXE Select Sector is currently generating about 0.52 per unit of volatility. If you would invest  88,534  in IXE Select Sector on October 24, 2024 and sell it today you would earn a total of  8,154  from holding IXE Select Sector or generate 9.21% return on investment over 90 days.

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

Sea  vs.  IXE Select Sector

Pair Trading with Sea and IXE Select

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

The idea behind Sea and IXE Select Sector 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .