Correlation Between Sea and Tradeweb Markets

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

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

Diversification Opportunities for Sea and Tradeweb Markets

0.88

Correlation Coefficient

Sea  Tradeweb Markets

Very poor diversification

The 3 months correlation between Sea and Tradeweb is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets 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 are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Sea i.e., Sea and Tradeweb Markets go up and down completely randomly.

Pair Corralation between Sea and Tradeweb Markets

Allowing for the 90-day total investment horizon Sea is expected to generate 1.77 times more return on investment than Tradeweb Markets. However, Sea is 1.77 times more volatile than Tradeweb Markets. It trades about 0.28 of its potential returns per unit of risk. Tradeweb Markets is currently generating about 0.18 per unit of risk. If you would invest  7,831  in Sea on August 30, 2024 and sell it today you would earn a total of  3,740  from holding Sea or generate 47.76% return on investment over 90 days.

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

Sea  vs.  Tradeweb Markets

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 fragile technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tradeweb Markets

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and Tradeweb Markets

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

The idea behind Sea and Tradeweb Markets 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.