Correlation Between Genie Music and Cloud Air

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

By analyzing existing cross correlation between Genie Music and Cloud Air CoLtd, you can compare the effects of market volatilities on Genie Music and Cloud Air 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 Genie Music with a short position of Cloud Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Music and Cloud Air.

Diversification Opportunities for Genie Music and Cloud Air

0.51

Correlation Coefficient

Genie Music  Cloud Air

Very weak diversification

The 3 months correlation between Genie and Cloud is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Genie Music and Cloud Air CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloud Air CoLtd and Genie Music 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 Genie Music are associated (or correlated) with Cloud Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloud Air CoLtd has no effect on the direction of Genie Music i.e., Genie Music and Cloud Air go up and down completely randomly.

Pair Corralation between Genie Music and Cloud Air

Assuming the 90 days trading horizon Genie Music is expected to under-perform the Cloud Air. In addition to that, Genie Music is 1.54 times more volatile than Cloud Air CoLtd. It trades about -0.06 of its total potential returns per unit of risk. Cloud Air CoLtd is currently generating about 0.01 per unit of volatility. If you would invest  90,000  in Cloud Air CoLtd on October 2, 2024 and sell it today you would lose (1,200) from holding Cloud Air CoLtd or give up 1.33% of portfolio value over 90 days.

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

Genie Music  vs.  Cloud Air CoLtd

Genie Music

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Music 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.

Cloud Air CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Genie Music and Cloud Air

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

The idea behind Genie Music and Cloud Air 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.

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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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.