Correlation Between Sea and Scholastic

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

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

Diversification Opportunities for Sea and Scholastic

-0.36

Correlation Coefficient

Sea  Scholastic

Very good diversification

The 3 months correlation between Sea and Scholastic is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Scholastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholastic 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 Scholastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholastic has no effect on the direction of Sea i.e., Sea and Scholastic go up and down completely randomly.

Pair Corralation between Sea and Scholastic

Allowing for the 90-day total investment horizon Sea is expected to generate 0.38 times more return on investment than Scholastic. However, Sea is 2.63 times less risky than Scholastic. It trades about -0.11 of its potential returns per unit of risk. Scholastic is currently generating about -0.28 per unit of risk. If you would invest  11,400  in Sea on September 26, 2024 and sell it today you would lose (461.00) from holding Sea or give up 4.04% of portfolio value over 90 days.

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

Sea  vs.  Scholastic

Sea

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 8 (%) 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.

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sea and Scholastic

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

The idea behind Sea and Scholastic 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.