Correlation Between Microfriend and GemVaxKAEL CoLtd

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

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

Diversification Opportunities for Microfriend and GemVaxKAEL CoLtd

0.24

Correlation Coefficient

Microfriend  GemVaxKAEL CoLtd

Modest diversification

The 3 months correlation between Microfriend and GemVaxKAEL is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and GemVaxKAEL CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GemVaxKAEL CoLtd and Microfriend 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 Microfriend are associated (or correlated) with GemVaxKAEL CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GemVaxKAEL CoLtd has no effect on the direction of Microfriend i.e., Microfriend and GemVaxKAEL CoLtd go up and down completely randomly.

Pair Corralation between Microfriend and GemVaxKAEL CoLtd

Assuming the 90 days trading horizon Microfriend is expected to under-perform the GemVaxKAEL CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Microfriend is 1.41 times less risky than GemVaxKAEL CoLtd. The stock trades about -0.1 of its potential returns per unit of risk. The GemVaxKAEL CoLtd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,060,000  in GemVaxKAEL CoLtd on October 5, 2024 and sell it today you would lose (601,000) from holding GemVaxKAEL CoLtd or give up 29.17% of portfolio value over 90 days.

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

Microfriend  vs.  GemVaxKAEL CoLtd

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend 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.

GemVaxKAEL CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microfriend and GemVaxKAEL CoLtd

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

The idea behind Microfriend and GemVaxKAEL 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.