Correlation Between Sembcorp Marine and HEICO

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

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

Diversification Opportunities for Sembcorp Marine and HEICO

0.13

Correlation Coefficient

Sembcorp Marine  HEICO

Average diversification

The 3 months correlation between Sembcorp and HEICO is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO 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 HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and HEICO go up and down completely randomly.

Pair Corralation between Sembcorp Marine and HEICO

Assuming the 90 days horizon Sembcorp Marine is expected to generate 5.29 times more return on investment than HEICO. However, Sembcorp Marine is 5.29 times more volatile than HEICO. It trades about 0.12 of its potential returns per unit of risk. HEICO is currently generating about 0.08 per unit of risk. If you would invest  102.00  in Sembcorp Marine on September 4, 2024 and sell it today you would earn a total of  45.00  from holding Sembcorp Marine or generate 44.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Sembcorp Marine  vs.  HEICO

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.

HEICO

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HEICO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HEICO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sembcorp Marine and HEICO

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

The idea behind Sembcorp Marine and HEICO 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.