Correlation Between Gold Rain and AVerMedia Technologies

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

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

Diversification Opportunities for Gold Rain and AVerMedia Technologies

0.36

Correlation Coefficient

Gold Rain  AVerMedia Technologies

Weak diversification

The 3 months correlation between Gold and AVerMedia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gold Rain Enterprises and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Gold Rain 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 Gold Rain Enterprises are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Gold Rain i.e., Gold Rain and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Gold Rain and AVerMedia Technologies

Assuming the 90 days trading horizon Gold Rain is expected to generate 1.53 times less return on investment than AVerMedia Technologies. But when comparing it to its historical volatility, Gold Rain Enterprises is 1.07 times less risky than AVerMedia Technologies. It trades about 0.04 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,270  in AVerMedia Technologies on October 21, 2024 and sell it today you would earn a total of  2,510  from holding AVerMedia Technologies or generate 110.57% return on investment over 90 days.

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

Gold Rain Enterprises  vs.  AVerMedia Technologies

Gold Rain Enterprises

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Rain Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gold Rain may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AVerMedia Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AVerMedia Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AVerMedia Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Rain and AVerMedia Technologies

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

The idea behind Gold Rain Enterprises and AVerMedia Technologies 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.