Correlation Between GS Retail and WISE ITech

Can any of the company-specific risk be diversified away by investing in both GS Retail and WISE ITech 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 WISE ITech 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 WISE iTech Co, you can compare the effects of market volatilities on GS Retail and WISE ITech 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 WISE ITech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GS Retail and WISE ITech.

Diversification Opportunities for GS Retail and WISE ITech

0.43

Correlation Coefficient

GS Retail  WISE ITech

Very weak diversification

The 3 months correlation between 007070 and WISE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and WISE iTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE iTech 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 WISE ITech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE iTech has no effect on the direction of GS Retail i.e., GS Retail and WISE ITech go up and down completely randomly.

Pair Corralation between GS Retail and WISE ITech

Assuming the 90 days trading horizon GS Retail is expected to generate 2.04 times less return on investment than WISE ITech. But when comparing it to its historical volatility, GS Retail Co is 1.99 times less risky than WISE ITech. It trades about 0.04 of its potential returns per unit of risk. WISE iTech Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  492,000  in WISE iTech Co on September 5, 2024 and sell it today you would earn a total of  21,000  from holding WISE iTech Co or generate 4.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.83%
Values	Daily Returns

GS Retail Co  vs.  WISE iTech Co

GS Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GS Retail Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GS Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WISE iTech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WISE iTech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WISE ITech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GS Retail and WISE ITech

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

The idea behind GS Retail Co and WISE iTech Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.