Correlation Between Seek and Randstad Holdings

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

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

Diversification Opportunities for Seek and Randstad Holdings

0.72

Correlation Coefficient

Seek  Randstad Holdings

Poor diversification

The 3 months correlation between Seek and Randstad is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Seek Ltd ADR and Randstad Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randstad Holdings and Seek 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 Seek Ltd ADR are associated (or correlated) with Randstad Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randstad Holdings has no effect on the direction of Seek i.e., Seek and Randstad Holdings go up and down completely randomly.

Pair Corralation between Seek and Randstad Holdings

Assuming the 90 days horizon Seek Ltd ADR is expected to generate 1.06 times more return on investment than Randstad Holdings. However, Seek is 1.06 times more volatile than Randstad Holdings NV. It trades about -0.02 of its potential returns per unit of risk. Randstad Holdings NV is currently generating about -0.04 per unit of risk. If you would invest  2,886  in Seek Ltd ADR on October 20, 2024 and sell it today you would lose (156.00) from holding Seek Ltd ADR or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.04%
Values	Daily Returns

Seek Ltd ADR  vs.  Randstad Holdings NV

Seek Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seek Ltd ADR 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 fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Randstad Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Randstad Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Seek and Randstad Holdings

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

The idea behind Seek Ltd ADR and Randstad Holdings NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.