Correlation Between SP Systems and Seoam Machinery

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

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

Diversification Opportunities for SP Systems and Seoam Machinery

0.57

Correlation Coefficient

SP Systems  Seoam Machinery

Very weak diversification

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

Pair Corralation between SP Systems and Seoam Machinery

Assuming the 90 days trading horizon SP Systems CoLtd is expected to under-perform the Seoam Machinery. But the stock apears to be less risky and, when comparing its historical volatility, SP Systems CoLtd is 1.21 times less risky than Seoam Machinery. The stock trades about -0.18 of its potential returns per unit of risk. The Seoam Machinery Industry is currently generating about -0.04 of returns per unit of risk over similar time horizon. 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

SP Systems CoLtd  vs.  Seoam Machinery Industry

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.

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.

Pair Trading with SP Systems and Seoam Machinery

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

The idea behind SP Systems CoLtd and Seoam Machinery Industry 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.