Correlation Between Sea and Etsy

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

By analyzing existing cross correlation between Sea Limited and Etsy Inc, you can compare the effects of market volatilities on Sea and Etsy 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 Etsy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Etsy.

Diversification Opportunities for Sea and Etsy

0.05

Correlation Coefficient

Sea  Etsy

Significant diversification

The 3 months correlation between Sea and Etsy is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Sea i.e., Sea and Etsy go up and down completely randomly.

Pair Corralation between Sea and Etsy

Assuming the 90 days trading horizon Sea Limited is expected to generate 1.35 times more return on investment than Etsy. However, Sea is 1.35 times more volatile than Etsy Inc. It trades about 0.29 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.02 per unit of risk. If you would invest  1,782  in Sea Limited on September 12, 2024 and sell it today you would earn a total of  948.00  from holding Sea Limited or generate 53.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Sea Limited  vs.  Etsy Inc

Sea Limited

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sea sustained solid returns over the last few months and may actually be approaching a breakup point.

Etsy Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Etsy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sea and Etsy

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

The idea behind Sea Limited and Etsy Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.