Correlation Between Goldsun Building and Information Technology

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

By analyzing existing cross correlation between Goldsun Building Materials and Information Technology Total, you can compare the effects of market volatilities on Goldsun Building and Information Technology 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 Goldsun Building with a short position of Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldsun Building and Information Technology.

Diversification Opportunities for Goldsun Building and Information Technology

-0.06

Correlation Coefficient

Goldsun Building  Information Technology

Good diversification

The 3 months correlation between Goldsun and Information is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Goldsun Building Materials and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology and Goldsun Building 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 Goldsun Building Materials are associated (or correlated) with Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Goldsun Building i.e., Goldsun Building and Information Technology go up and down completely randomly.

Pair Corralation between Goldsun Building and Information Technology

Assuming the 90 days trading horizon Goldsun Building Materials is expected to under-perform the Information Technology. But the stock apears to be less risky and, when comparing its historical volatility, Goldsun Building Materials is 1.06 times less risky than Information Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Information Technology Total is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,410  in Information Technology Total on October 23, 2024 and sell it today you would earn a total of  180.00  from holding Information Technology Total or generate 4.08% return on investment over 90 days.

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

Goldsun Building Materials  vs.  Information Technology Total

Goldsun Building Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldsun Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Information Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Information Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Goldsun Building and Information Technology

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

The idea behind Goldsun Building Materials and Information Technology Total 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.