Correlation Between Sembcorp Marine and Coda Octopus

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

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

Diversification Opportunities for Sembcorp Marine and Coda Octopus

0.49

Correlation Coefficient

Sembcorp Marine  Coda Octopus

Very weak diversification

The 3 months correlation between Sembcorp and Coda is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and Coda Octopus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coda Octopus Group and Sembcorp Marine 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 Sembcorp Marine are associated (or correlated) with Coda Octopus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coda Octopus Group has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and Coda Octopus go up and down completely randomly.

Pair Corralation between Sembcorp Marine and Coda Octopus

Assuming the 90 days horizon Sembcorp Marine is expected to under-perform the Coda Octopus. In addition to that, Sembcorp Marine is 1.79 times more volatile than Coda Octopus Group. It trades about -0.01 of its total potential returns per unit of risk. Coda Octopus Group is currently generating about 0.07 per unit of volatility. If you would invest  870.00  in Coda Octopus Group on September 4, 2024 and sell it today you would earn a total of  37.00  from holding Coda Octopus Group or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Sembcorp Marine  vs.  Coda Octopus Group

Sembcorp Marine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sembcorp Marine are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Sembcorp Marine reported solid returns over the last few months and may actually be approaching a breakup point.

Coda Octopus Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coda Octopus Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Coda Octopus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sembcorp Marine and Coda Octopus

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

The idea behind Sembcorp Marine and Coda Octopus Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.