Correlation Between Sei and Fantom

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

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

Diversification Opportunities for Sei and Fantom

0.95

Correlation Coefficient

Sei  Fantom

Almost no diversification

The 3 months correlation between Sei and Fantom is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sei and Fantom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantom and Sei 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 Sei are associated (or correlated) with Fantom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantom has no effect on the direction of Sei i.e., Sei and Fantom go up and down completely randomly.

Pair Corralation between Sei and Fantom

Assuming the 90 days trading horizon Sei is expected to generate 1.08 times less return on investment than Fantom. But when comparing it to its historical volatility, Sei is 1.16 times less risky than Fantom. It trades about 0.25 of its potential returns per unit of risk. Fantom is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Fantom on September 1, 2024 and sell it today you would earn a total of  66.00  from holding Fantom or generate 169.23% return on investment over 90 days.

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

Sei  vs.  Fantom

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.

Fantom

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Sei and Fantom

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

The idea behind Sei and Fantom 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.