Correlation Between Sea and Ubisoft Entertainment

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

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

Diversification Opportunities for Sea and Ubisoft Entertainment

-0.15

Correlation Coefficient

Sea  Ubisoft Entertainment

Good diversification

The 3 months correlation between Sea and Ubisoft is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited and Ubisoft Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment and Sea 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 Sea Limited are associated (or correlated) with Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Sea i.e., Sea and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between Sea and Ubisoft Entertainment

Assuming the 90 days horizon Sea Limited is expected to generate 0.58 times more return on investment than Ubisoft Entertainment. However, Sea Limited is 1.74 times less risky than Ubisoft Entertainment. It trades about 0.17 of its potential returns per unit of risk. Ubisoft Entertainment SA is currently generating about -0.1 per unit of risk. If you would invest  6,520  in Sea Limited on September 3, 2024 and sell it today you would earn a total of  4,180  from holding Sea Limited or generate 64.11% return on investment over 90 days.

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

Sea Limited  vs.  Ubisoft Entertainment SA

Sea Limited

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

Ubisoft Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubisoft Entertainment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sea and Ubisoft Entertainment

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

The idea behind Sea Limited and Ubisoft Entertainment SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.