Correlation Between Sea Oil and Smart Concrete

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

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

Diversification Opportunities for Sea Oil and Smart Concrete

-0.46

Correlation Coefficient

Sea Oil  Smart Concrete

Very good diversification

The 3 months correlation between Sea and Smart is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sea Oil Public and Smart Concrete Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Concrete Public and Sea Oil 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 Oil Public are associated (or correlated) with Smart Concrete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Concrete Public has no effect on the direction of Sea Oil i.e., Sea Oil and Smart Concrete go up and down completely randomly.

Pair Corralation between Sea Oil and Smart Concrete

Assuming the 90 days trading horizon Sea Oil Public is expected to generate 0.97 times more return on investment than Smart Concrete. However, Sea Oil Public is 1.03 times less risky than Smart Concrete. It trades about 0.08 of its potential returns per unit of risk. Smart Concrete Public is currently generating about -0.1 per unit of risk. If you would invest  243.00  in Sea Oil Public on September 15, 2024 and sell it today you would earn a total of  17.00  from holding Sea Oil Public or generate 7.0% return on investment over 90 days.

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

Sea Oil Public  vs.  Smart Concrete Public

Sea Oil Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Oil Public are ranked lower than 6 (%) 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.

Smart Concrete Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart Concrete Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sea Oil and Smart Concrete

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

The idea behind Sea Oil Public and Smart Concrete 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.