Correlation Between Change Financial and Sequoia Financial

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

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

Diversification Opportunities for Change Financial and Sequoia Financial

0.29

Correlation Coefficient

Change Financial  Sequoia Financial

Modest diversification

The 3 months correlation between Change and Sequoia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Change Financial Limited and Sequoia Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequoia Financial and Change Financial 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 Change Financial Limited are associated (or correlated) with Sequoia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequoia Financial has no effect on the direction of Change Financial i.e., Change Financial and Sequoia Financial go up and down completely randomly.

Pair Corralation between Change Financial and Sequoia Financial

Assuming the 90 days trading horizon Change Financial Limited is expected to under-perform the Sequoia Financial. In addition to that, Change Financial is 1.33 times more volatile than Sequoia Financial Group. It trades about -0.08 of its total potential returns per unit of risk. Sequoia Financial Group is currently generating about -0.02 per unit of volatility. If you would invest  39.00  in Sequoia Financial Group on September 24, 2024 and sell it today you would lose (2.00) from holding Sequoia Financial Group or give up 5.13% of portfolio value over 90 days.

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

Change Financial Limited  vs.  Sequoia Financial Group

Change Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Change Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sequoia Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sequoia Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sequoia Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Change Financial and Sequoia Financial

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

The idea behind Change Financial Limited and Sequoia Financial Group 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.