Correlation Between Trump Media and Sea

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

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

Diversification Opportunities for Trump Media and Sea

0.55

Correlation Coefficient

Trump Media  Sea

Very weak diversification

The 3 months correlation between Trump and Sea is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Trump Media Technology and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Trump Media 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 Trump Media Technology are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Trump Media i.e., Trump Media and Sea go up and down completely randomly.

Pair Corralation between Trump Media and Sea

Assuming the 90 days horizon Trump Media Technology is expected to generate 4.6 times more return on investment than Sea. However, Trump Media is 4.6 times more volatile than Sea. It trades about 0.15 of its potential returns per unit of risk. Sea is currently generating about 0.27 per unit of risk. If you would invest  1,114  in Trump Media Technology on September 3, 2024 and sell it today you would earn a total of  1,048  from holding Trump Media Technology or generate 94.08% return on investment over 90 days.

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

Trump Media Technology  vs.  Sea

Trump Media Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trump Media Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Trump Media showed solid returns over the last few months and may actually be approaching a breakup point.

Sea

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trump Media and Sea

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

The idea behind Trump Media Technology and Sea 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.