Correlation Between GS Retail and ECSTELECOM

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

Diversification Opportunities for GS Retail and ECSTELECOM

-0.28

Correlation Coefficient

GS Retail  ECSTELECOM

Very good diversification

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

Pair Corralation between GS Retail and ECSTELECOM

Assuming the 90 days trading horizon GS Retail Co is expected to under-perform the ECSTELECOM. In addition to that, GS Retail is 1.65 times more volatile than ECSTELECOM Co. It trades about -0.11 of its total potential returns per unit of risk. ECSTELECOM Co is currently generating about 0.07 per unit of volatility. If you would invest  296,500  in ECSTELECOM Co on October 11, 2024 and sell it today you would earn a total of  18,000  from holding ECSTELECOM Co or generate 6.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.58%
Values	Daily Returns

GS Retail Co  vs.  ECSTELECOM Co

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.

ECSTELECOM

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECSTELECOM Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ECSTELECOM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GS Retail and ECSTELECOM

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

The idea behind GS Retail Co and ECSTELECOM 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.