Correlation Between Sea and La Rosa

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

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

Diversification Opportunities for Sea and La Rosa

-0.38

Correlation Coefficient

Sea  La Rosa

Very good diversification

The 3 months correlation between Sea and LRHC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sea and La Rosa Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Rosa Holdings 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 La Rosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Rosa Holdings has no effect on the direction of Sea i.e., Sea and La Rosa go up and down completely randomly.

Pair Corralation between Sea and La Rosa

Allowing for the 90-day total investment horizon Sea is expected to generate 0.24 times more return on investment than La Rosa. However, Sea is 4.09 times less risky than La Rosa. It trades about 0.04 of its potential returns per unit of risk. La Rosa Holdings is currently generating about -0.12 per unit of risk. If you would invest  11,400  in Sea on October 26, 2024 and sell it today you would earn a total of  246.00  from holding Sea or generate 2.16% return on investment over 90 days.

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

Sea  vs.  La Rosa Holdings

Sea

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 9 (%) 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.

La Rosa Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days La Rosa Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sea and La Rosa

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

The idea behind Sea and La Rosa Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.