Correlation Between HOT and Sei

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

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

Diversification Opportunities for HOT and Sei

0.84

Correlation Coefficient

HOT  Sei

Very poor diversification

The 3 months correlation between HOT and Sei is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HOT and Sei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sei and HOT 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 HOT are associated (or correlated) with Sei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sei has no effect on the direction of HOT i.e., HOT and Sei go up and down completely randomly.

Pair Corralation between HOT and Sei

Assuming the 90 days trading horizon HOT is expected to generate 1.26 times less return on investment than Sei. But when comparing it to its historical volatility, HOT is 1.19 times less risky than Sei. It trades about 0.23 of its potential returns per unit of risk. Sei is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Sei on September 1, 2024 and sell it today you would earn a total of  41.00  from holding Sei or generate 157.69% return on investment over 90 days.

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

HOT  vs.  Sei

HOT

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOT are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HOT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sei

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sei are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Sei exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HOT and Sei

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

The idea behind HOT and Sei 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.