Correlation Between Gome Telecom and INKON Life

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

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

Diversification Opportunities for Gome Telecom and INKON Life

0.28

Correlation Coefficient

Gome Telecom  INKON Life

Modest diversification

The 3 months correlation between Gome and INKON is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and Gome Telecom 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 Gome Telecom Equipment are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of Gome Telecom i.e., Gome Telecom and INKON Life go up and down completely randomly.

Pair Corralation between Gome Telecom and INKON Life

Assuming the 90 days trading horizon Gome Telecom Equipment is expected to under-perform the INKON Life. But the stock apears to be less risky and, when comparing its historical volatility, Gome Telecom Equipment is 1.24 times less risky than INKON Life. The stock trades about -0.05 of its potential returns per unit of risk. The INKON Life Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  725.00  in INKON Life Technology on September 23, 2024 and sell it today you would earn a total of  215.00  from holding INKON Life Technology or generate 29.66% return on investment over 90 days.

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

Gome Telecom Equipment  vs.  INKON Life Technology

Gome Telecom Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gome Telecom Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

INKON Life Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INKON Life Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INKON Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and INKON Life

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

The idea behind Gome Telecom Equipment and INKON Life Technology 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.