Correlation Between SE Education and Union Auction

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

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

Diversification Opportunities for SE Education and Union Auction

-0.29

Correlation Coefficient

SE Education  Union Auction

Very good diversification

The 3 months correlation between SE-ED and Union is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SE Education Public and Union Auction Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Auction Public and SE Education 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 SE Education Public are associated (or correlated) with Union Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Auction Public has no effect on the direction of SE Education i.e., SE Education and Union Auction go up and down completely randomly.

Pair Corralation between SE Education and Union Auction

Assuming the 90 days trading horizon SE Education Public is expected to generate 0.5 times more return on investment than Union Auction. However, SE Education Public is 2.02 times less risky than Union Auction. It trades about -0.24 of its potential returns per unit of risk. Union Auction Public is currently generating about -0.25 per unit of risk. If you would invest  230.00  in SE Education Public on January 31, 2024 and sell it today you would lose (10.00) from holding SE Education Public or give up 4.35% of portfolio value over 90 days.

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

SE Education Public  vs.  Union Auction Public

SE Education Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SE Education Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, SE Education is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Union Auction Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Auction Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SE Education and Union Auction

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

The idea behind SE Education Public and Union Auction 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.