Correlation Between Broadex Technologies and Gome Telecom

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

By analyzing existing cross correlation between Broadex Technologies Co and Gome Telecom Equipment, you can compare the effects of market volatilities on Broadex Technologies and Gome Telecom 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 Broadex Technologies with a short position of Gome Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadex Technologies and Gome Telecom.

Diversification Opportunities for Broadex Technologies and Gome Telecom

0.52

Correlation Coefficient

Broadex Technologies  Gome Telecom

Very weak diversification

The 3 months correlation between Broadex and Gome is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Broadex Technologies Co and Gome Telecom Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gome Telecom Equipment and Broadex Technologies 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 Broadex Technologies Co are associated (or correlated) with Gome Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gome Telecom Equipment has no effect on the direction of Broadex Technologies i.e., Broadex Technologies and Gome Telecom go up and down completely randomly.

Pair Corralation between Broadex Technologies and Gome Telecom

Assuming the 90 days trading horizon Broadex Technologies Co is expected to under-perform the Gome Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Broadex Technologies Co is 1.24 times less risky than Gome Telecom. The stock trades about -0.19 of its potential returns per unit of risk. The Gome Telecom Equipment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Gome Telecom Equipment on September 1, 2024 and sell it today you would earn a total of  4.00  from holding Gome Telecom Equipment or generate 2.15% return on investment over 90 days.

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

Broadex Technologies Co  vs.  Gome Telecom Equipment

Broadex Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadex Technologies Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Broadex Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Gome Telecom Equipment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gome Telecom Equipment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gome Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadex Technologies and Gome Telecom

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

The idea behind Broadex Technologies Co and Gome Telecom Equipment 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.