Correlation Between Sea and VirnetX Holding

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

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

Diversification Opportunities for Sea and VirnetX Holding

-0.89

Correlation Coefficient

Sea  VirnetX Holding

Pay attention - limited upside

The 3 months correlation between Sea and VirnetX is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sea and VirnetX Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirnetX Holding Corp 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 VirnetX Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirnetX Holding Corp has no effect on the direction of Sea i.e., Sea and VirnetX Holding go up and down completely randomly.

Pair Corralation between Sea and VirnetX Holding

Allowing for the 90-day total investment horizon Sea is expected to generate 0.88 times more return on investment than VirnetX Holding. However, Sea is 1.14 times less risky than VirnetX Holding. It trades about 0.26 of its potential returns per unit of risk. VirnetX Holding Corp is currently generating about -0.28 per unit of risk. If you would invest  7,988  in Sea on September 15, 2024 and sell it today you would earn a total of  3,659  from holding Sea or generate 45.81% return on investment over 90 days.

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

Sea  vs.  VirnetX Holding Corp

Sea

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 20 (%) 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.

VirnetX Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sea and VirnetX Holding

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

The idea behind Sea and VirnetX Holding Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.