Correlation Between Sealed Air and SohuCom

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

By analyzing existing cross correlation between Sealed Air and SohuCom, you can compare the effects of market volatilities on Sealed Air and SohuCom 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 Sealed Air with a short position of SohuCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and SohuCom.

Diversification Opportunities for Sealed Air and SohuCom

-0.36

Correlation Coefficient

Sealed Air  SohuCom

Very good diversification

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

Pair Corralation between Sealed Air and SohuCom

Considering the 90-day investment horizon Sealed Air is expected to under-perform the SohuCom. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 1.53 times less risky than SohuCom. The stock trades about -0.1 of its potential returns per unit of risk. The SohuCom is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,318  in SohuCom on December 20, 2024 and sell it today you would earn a total of  70.00  from holding SohuCom or generate 5.31% return on investment over 90 days.

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

Sealed Air  vs.  SohuCom

Sealed Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SohuCom

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, SohuCom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sealed Air and SohuCom

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

The idea behind Sealed Air and SohuCom 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.