Correlation Between Gemdale Corp and National Silicon

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

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

Diversification Opportunities for Gemdale Corp and National Silicon

0.34

Correlation Coefficient

Gemdale Corp  National Silicon

Weak diversification

The 3 months correlation between Gemdale and National is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gemdale Corp and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry and Gemdale Corp 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 Gemdale Corp are associated (or correlated) with National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of Gemdale Corp i.e., Gemdale Corp and National Silicon go up and down completely randomly.

Pair Corralation between Gemdale Corp and National Silicon

Assuming the 90 days trading horizon Gemdale Corp is expected to generate 0.81 times more return on investment than National Silicon. However, Gemdale Corp is 1.23 times less risky than National Silicon. It trades about 0.02 of its potential returns per unit of risk. National Silicon Industry is currently generating about -0.02 per unit of risk. If you would invest  462.00  in Gemdale Corp on December 27, 2024 and sell it today you would earn a total of  3.00  from holding Gemdale Corp or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Gemdale Corp  vs.  National Silicon Industry

Gemdale Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gemdale Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gemdale Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Silicon Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Silicon Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, National Silicon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gemdale Corp and National Silicon

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

The idea behind Gemdale Corp and National Silicon Industry 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.