Correlation Between GRG Banking and Financial Street

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

By analyzing existing cross correlation between GRG Banking Equipment and Financial Street Holdings, you can compare the effects of market volatilities on GRG Banking and Financial Street 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 GRG Banking with a short position of Financial Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRG Banking and Financial Street.

Diversification Opportunities for GRG Banking and Financial Street

0.75

Correlation Coefficient

GRG Banking  Financial Street

Poor diversification

The 3 months correlation between GRG and Financial is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GRG Banking Equipment and Financial Street Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Street Holdings and GRG Banking 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 GRG Banking Equipment are associated (or correlated) with Financial Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Street Holdings has no effect on the direction of GRG Banking i.e., GRG Banking and Financial Street go up and down completely randomly.

Pair Corralation between GRG Banking and Financial Street

Assuming the 90 days trading horizon GRG Banking Equipment is expected to generate 0.87 times more return on investment than Financial Street. However, GRG Banking Equipment is 1.15 times less risky than Financial Street. It trades about -0.46 of its potential returns per unit of risk. Financial Street Holdings is currently generating about -0.55 per unit of risk. If you would invest  1,310  in GRG Banking Equipment on October 11, 2024 and sell it today you would lose (228.00) from holding GRG Banking Equipment or give up 17.4% of portfolio value over 90 days.

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

GRG Banking Equipment  vs.  Financial Street Holdings

GRG Banking Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Financial Street Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GRG Banking and Financial Street

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

The idea behind GRG Banking Equipment and Financial Street Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.