Correlation Between Premier Technology and Sea Oil

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

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

Diversification Opportunities for Premier Technology and Sea Oil

0.6

Correlation Coefficient

Premier Technology  Sea Oil

Poor diversification

The 3 months correlation between Premier and Sea is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Premier Technology Public and Sea Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Oil Public and Premier Technology 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 Premier Technology Public are associated (or correlated) with Sea Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Oil Public has no effect on the direction of Premier Technology i.e., Premier Technology and Sea Oil go up and down completely randomly.

Pair Corralation between Premier Technology and Sea Oil

Assuming the 90 days horizon Premier Technology is expected to generate 11.3 times less return on investment than Sea Oil. But when comparing it to its historical volatility, Premier Technology Public is 1.85 times less risky than Sea Oil. It trades about 0.01 of its potential returns per unit of risk. Sea Oil Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  243.00  in Sea Oil Public on September 13, 2024 and sell it today you would earn a total of  19.00  from holding Sea Oil Public or generate 7.82% return on investment over 90 days.

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

Premier Technology Public  vs.  Sea Oil Public

Premier Technology Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Technology Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Premier Technology is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sea Oil Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Oil Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Sea Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premier Technology and Sea Oil

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

The idea behind Premier Technology Public and Sea Oil Public 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 CEOs Directory module to screen CEOs from public companies around the world.