Correlation Between GS Retail and IM CoLtd

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

Diversification Opportunities for GS Retail and IM CoLtd

-0.15

Correlation Coefficient

GS Retail  IM CoLtd

Good diversification

The 3 months correlation between 007070 and 101390 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and IM CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM CoLtd 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 IM CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM CoLtd has no effect on the direction of GS Retail i.e., GS Retail and IM CoLtd go up and down completely randomly.

Pair Corralation between GS Retail and IM CoLtd

Assuming the 90 days trading horizon GS Retail Co is expected to generate 0.16 times more return on investment than IM CoLtd. However, GS Retail Co is 6.45 times less risky than IM CoLtd. It trades about -0.13 of its potential returns per unit of risk. IM CoLtd is currently generating about -0.12 per unit of risk. If you would invest  1,674,526  in GS Retail Co on December 26, 2024 and sell it today you would lose (185,526) from holding GS Retail Co or give up 11.08% of portfolio value over 90 days.

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

GS Retail Co  vs.  IM CoLtd

GS Retail

Risk-Adjusted Performance

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 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.

IM CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days IM CoLtd 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GS Retail and IM CoLtd

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

The idea behind GS Retail Co and IM CoLtd 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.