Correlation Between SEPC and Touchwood Entertainment

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

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

Diversification Opportunities for SEPC and Touchwood Entertainment

0.57

Correlation Coefficient

SEPC  Touchwood Entertainment

Very weak diversification

The 3 months correlation between SEPC and Touchwood is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SEPC Limited and Touchwood Entertainment Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchwood Entertainment and SEPC 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 SEPC Limited are associated (or correlated) with Touchwood Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchwood Entertainment has no effect on the direction of SEPC i.e., SEPC and Touchwood Entertainment go up and down completely randomly.

Pair Corralation between SEPC and Touchwood Entertainment

Assuming the 90 days trading horizon SEPC Limited is expected to under-perform the Touchwood Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, SEPC Limited is 1.11 times less risky than Touchwood Entertainment. The stock trades about -0.17 of its potential returns per unit of risk. The Touchwood Entertainment Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,708  in Touchwood Entertainment Limited on October 10, 2024 and sell it today you would lose (1,139) from holding Touchwood Entertainment Limited or give up 7.25% of portfolio value over 90 days.

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

SEPC Limited  vs.  Touchwood Entertainment Limite

SEPC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEPC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Touchwood Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchwood Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Touchwood Entertainment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SEPC and Touchwood Entertainment

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

The idea behind SEPC Limited and Touchwood Entertainment Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.