Correlation Between Seoam Machinery and SP Systems

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

By analyzing existing cross correlation between Seoam Machinery Industry and SP Systems CoLtd, you can compare the effects of market volatilities on Seoam Machinery and SP Systems 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 Seoam Machinery with a short position of SP Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoam Machinery and SP Systems.

Diversification Opportunities for Seoam Machinery and SP Systems

0.57

Correlation Coefficient

Seoam Machinery  SP Systems

Very weak diversification

The 3 months correlation between Seoam and 317830 is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Seoam Machinery Industry and SP Systems CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Systems CoLtd and Seoam Machinery 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 Seoam Machinery Industry are associated (or correlated) with SP Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Systems CoLtd has no effect on the direction of Seoam Machinery i.e., Seoam Machinery and SP Systems go up and down completely randomly.

Pair Corralation between Seoam Machinery and SP Systems

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to generate 1.21 times more return on investment than SP Systems. However, Seoam Machinery is 1.21 times more volatile than SP Systems CoLtd. It trades about -0.04 of its potential returns per unit of risk. SP Systems CoLtd is currently generating about -0.18 per unit of risk. If you would invest  385,500  in Seoam Machinery Industry on September 12, 2024 and sell it today you would lose (45,000) from holding Seoam Machinery Industry or give up 11.67% of portfolio value over 90 days.

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

Seoam Machinery Industry  vs.  SP Systems CoLtd

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SP Systems CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Systems CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Seoam Machinery and SP Systems

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

The idea behind Seoam Machinery Industry and SP Systems CoLtd 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.