Correlation Between Sea and Cardlytics

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

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

Diversification Opportunities for Sea and Cardlytics

0.52

Correlation Coefficient

Sea  Cardlytics

Very weak diversification

The 3 months correlation between Sea and Cardlytics is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Cardlytics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardlytics 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 Cardlytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardlytics has no effect on the direction of Sea i.e., Sea and Cardlytics go up and down completely randomly.

Pair Corralation between Sea and Cardlytics

Allowing for the 90-day total investment horizon Sea is expected to generate 0.31 times more return on investment than Cardlytics. However, Sea is 3.18 times less risky than Cardlytics. It trades about 0.35 of its potential returns per unit of risk. Cardlytics is currently generating about -0.13 per unit of risk. If you would invest  5,272  in Sea on February 14, 2024 and sell it today you would earn a total of  1,174  from holding Sea or generate 22.27% return on investment over 90 days.

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

Sea  vs.  Cardlytics

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.

Cardlytics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardlytics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Cardlytics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and Cardlytics

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

The idea behind Sea and Cardlytics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.