Correlation Between Inspur Software and GEM

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

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

Diversification Opportunities for Inspur Software and GEM

0.74

Correlation Coefficient

Inspur Software  GEM

Poor diversification

The 3 months correlation between Inspur and GEM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Inspur Software Co and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co and Inspur Software 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 Inspur Software Co are associated (or correlated) with GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Inspur Software i.e., Inspur Software and GEM go up and down completely randomly.

Pair Corralation between Inspur Software and GEM

Assuming the 90 days trading horizon Inspur Software is expected to generate 2.66 times less return on investment than GEM. In addition to that, Inspur Software is 1.24 times more volatile than GEM Co. It trades about 0.01 of its total potential returns per unit of risk. GEM Co is currently generating about 0.04 per unit of volatility. If you would invest  548.00  in GEM Co on October 3, 2024 and sell it today you would earn a total of  105.00  from holding GEM Co or generate 19.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.61%
Values	Daily Returns

Inspur Software Co  vs.  GEM Co

Inspur Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Inspur Software and GEM

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

The idea behind Inspur Software Co and GEM Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.