Correlation Between Sea and Hooker Furniture

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

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

Diversification Opportunities for Sea and Hooker Furniture

-0.76

Correlation Coefficient

Sea  Hooker Furniture

Pay attention - limited upside

The 3 months correlation between Sea and Hooker is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Sea i.e., Sea and Hooker Furniture go up and down completely randomly.

Pair Corralation between Sea and Hooker Furniture

Allowing for the 90-day total investment horizon Sea is expected to generate 1.85 times more return on investment than Hooker Furniture. However, Sea is 1.85 times more volatile than Hooker Furniture. It trades about 0.35 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.08 per unit of risk. If you would invest  5,638  in Sea on February 16, 2024 and sell it today you would earn a total of  1,226  from holding Sea or generate 21.75% return on investment over 90 days.

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

Sea  vs.  Hooker Furniture

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 weak technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sea and Hooker Furniture

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

The idea behind Sea and Hooker Furniture 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .