Correlation Between Sei and YAM

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

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

Diversification Opportunities for Sei and YAM

-0.34

Correlation Coefficient

Sei  YAM

Very good diversification

The 3 months correlation between Sei and YAM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sei and YAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAM 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 YAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAM has no effect on the direction of Sei i.e., Sei and YAM go up and down completely randomly.

Pair Corralation between Sei and YAM

Assuming the 90 days trading horizon Sei is expected to generate 1.41 times more return on investment than YAM. However, Sei is 1.41 times more volatile than YAM. It trades about 0.25 of its potential returns per unit of risk. YAM is currently generating about -0.02 per unit of risk. If you would invest  26.00  in Sei on September 2, 2024 and sell it today you would earn a total of  41.00  from holding Sei or generate 157.69% return on investment over 90 days.

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

Sei  vs.  YAM

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.

YAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, YAM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sei and YAM

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

The idea behind Sei and YAM 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.