Correlation Between GEM and State Grid

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

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

Diversification Opportunities for GEM and State Grid

0.82

Correlation Coefficient

GEM  State Grid

Very poor diversification

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

Pair Corralation between GEM and State Grid

Assuming the 90 days trading horizon GEM Co is expected to generate 0.84 times more return on investment than State Grid. However, GEM Co is 1.19 times less risky than State Grid. It trades about -0.03 of its potential returns per unit of risk. State Grid InformationCommunication is currently generating about -0.21 per unit of risk. If you would invest  661.00  in GEM Co on October 22, 2024 and sell it today you would lose (8.00) from holding GEM Co or give up 1.21% of portfolio value over 90 days.

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

GEM Co  vs.  State Grid InformationCommunic

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GEM and State Grid

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

The idea behind GEM Co and State Grid InformationCommunication 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 CEOs Directory module to screen CEOs from public companies around the world.