Correlation Between Holy Stone and GeoVision

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

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

Diversification Opportunities for Holy Stone and GeoVision

0.6

Correlation Coefficient

Holy Stone  GeoVision

Poor diversification

The 3 months correlation between Holy and GeoVision is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and GeoVision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVision and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with GeoVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVision has no effect on the direction of Holy Stone i.e., Holy Stone and GeoVision go up and down completely randomly.

Pair Corralation between Holy Stone and GeoVision

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to generate 0.32 times more return on investment than GeoVision. However, Holy Stone Enterprise is 3.17 times less risky than GeoVision. It trades about -0.19 of its potential returns per unit of risk. GeoVision is currently generating about -0.2 per unit of risk. If you would invest  9,060  in Holy Stone Enterprise on October 9, 2024 and sell it today you would lose (500.00) from holding Holy Stone Enterprise or give up 5.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Holy Stone Enterprise  vs.  GeoVision

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

GeoVision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GeoVision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, GeoVision 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 Holy Stone and GeoVision

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

The idea behind Holy Stone Enterprise and GeoVision 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.