Correlation Between GS Retail and INSUN Environmental

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

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

Diversification Opportunities for GS Retail and INSUN Environmental

0.28

Correlation Coefficient

GS Retail  INSUN Environmental

Modest diversification

The 3 months correlation between 007070 and INSUN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and INSUN Environmental New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSUN Environmental New and GS Retail 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 GS Retail Co are associated (or correlated) with INSUN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSUN Environmental New has no effect on the direction of GS Retail i.e., GS Retail and INSUN Environmental go up and down completely randomly.

Pair Corralation between GS Retail and INSUN Environmental

Assuming the 90 days trading horizon GS Retail Co is expected to under-perform the INSUN Environmental. In addition to that, GS Retail is 1.04 times more volatile than INSUN Environmental New. It trades about -0.1 of its total potential returns per unit of risk. INSUN Environmental New is currently generating about -0.01 per unit of volatility. If you would invest  569,000  in INSUN Environmental New on October 11, 2024 and sell it today you would lose (17,000) from holding INSUN Environmental New or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

GS Retail Co  vs.  INSUN Environmental New

GS Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GS Retail Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GS Retail and INSUN Environmental

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

The idea behind GS Retail Co and INSUN Environmental New 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.