Correlation Between ISU Abxis and GS Retail

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

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

Diversification Opportunities for ISU Abxis and GS Retail

0.45

Correlation Coefficient

ISU Abxis  GS Retail

Very weak diversification

The 3 months correlation between ISU and 007070 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ISU Abxis Co and GS Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Retail and ISU Abxis 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 ISU Abxis Co are associated (or correlated) with GS Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Retail has no effect on the direction of ISU Abxis i.e., ISU Abxis and GS Retail go up and down completely randomly.

Pair Corralation between ISU Abxis and GS Retail

Assuming the 90 days trading horizon ISU Abxis Co is expected to under-perform the GS Retail. But the stock apears to be less risky and, when comparing its historical volatility, ISU Abxis Co is 1.05 times less risky than GS Retail. The stock trades about -0.2 of its potential returns per unit of risk. The GS Retail Co is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,885,447  in GS Retail Co on October 25, 2024 and sell it today you would lose (302,447) from holding GS Retail Co or give up 16.04% of portfolio value over 90 days.

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

ISU Abxis Co  vs.  GS Retail Co

ISU Abxis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ISU Abxis 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.

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.

Pair Trading with ISU Abxis and GS Retail

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

The idea behind ISU Abxis Co and GS Retail 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.