Correlation Between GEM and Success Electronics

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

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

Diversification Opportunities for GEM and Success Electronics

0.11

Correlation Coefficient

GEM  Success Electronics

Average diversification

The 3 months correlation between GEM and Success is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding GEM Co and Success Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Success Electronics and GEM 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 GEM Co are associated (or correlated) with Success Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Success Electronics has no effect on the direction of GEM i.e., GEM and Success Electronics go up and down completely randomly.

Pair Corralation between GEM and Success Electronics

Assuming the 90 days trading horizon GEM is expected to generate 1.98 times less return on investment than Success Electronics. But when comparing it to its historical volatility, GEM Co is 1.14 times less risky than Success Electronics. It trades about 0.06 of its potential returns per unit of risk. Success Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  312.00  in Success Electronics on October 24, 2024 and sell it today you would earn a total of  72.00  from holding Success Electronics or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.77%
Values	Daily Returns

GEM Co  vs.  Success Electronics

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Success Electronics

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Success Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Success Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GEM and Success Electronics

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

The idea behind GEM Co and Success Electronics 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.