Correlation Between Sea and Genuine Parts

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

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

Diversification Opportunities for Sea and Genuine Parts

0.82

Correlation Coefficient

Sea  Genuine Parts

Very poor diversification

The 3 months correlation between Sea and Genuine is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts and Sea 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 Sea are associated (or correlated) with Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Sea i.e., Sea and Genuine Parts go up and down completely randomly.

Pair Corralation between Sea and Genuine Parts

Allowing for the 90-day total investment horizon Sea is expected to generate 1.16 times more return on investment than Genuine Parts. However, Sea is 1.16 times more volatile than Genuine Parts Co. It trades about 0.27 of its potential returns per unit of risk. Genuine Parts Co is currently generating about 0.09 per unit of risk. If you would invest  5,598  in Sea on February 7, 2024 and sell it today you would earn a total of  1,015  from holding Sea or generate 18.13% return on investment over 90 days.

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

Sea  vs.  Genuine Parts Co

Sea

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Genuine Parts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Genuine Parts may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sea and Genuine Parts

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

The idea behind Sea and Genuine Parts Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.