Correlation Between Seafarer Exploration and Aramark Holdings

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

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

Diversification Opportunities for Seafarer Exploration and Aramark Holdings

0.32

Correlation Coefficient

Seafarer Exploration  Aramark Holdings

Weak diversification

The 3 months correlation between Seafarer and Aramark is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Seafarer Exploration and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings and Seafarer Exploration 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 Seafarer Exploration are associated (or correlated) with Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of Seafarer Exploration i.e., Seafarer Exploration and Aramark Holdings go up and down completely randomly.

Pair Corralation between Seafarer Exploration and Aramark Holdings

Given the investment horizon of 90 days Seafarer Exploration is expected to generate 2.99 times more return on investment than Aramark Holdings. However, Seafarer Exploration is 2.99 times more volatile than Aramark Holdings. It trades about 0.01 of its potential returns per unit of risk. Aramark Holdings is currently generating about -0.1 per unit of risk. If you would invest  0.43  in Seafarer Exploration on December 21, 2024 and sell it today you would lose (0.02) from holding Seafarer Exploration or give up 4.65% of portfolio value over 90 days.

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

Seafarer Exploration  vs.  Aramark Holdings

Seafarer Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seafarer Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Seafarer Exploration is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Aramark Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aramark Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Seafarer Exploration and Aramark Holdings

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

The idea behind Seafarer Exploration and Aramark 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.