Correlation Between Gome Telecom and RoadMain T

Can any of the company-specific risk be diversified away by investing in both Gome Telecom and RoadMain T 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 RoadMain T 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 RoadMain T Co, you can compare the effects of market volatilities on Gome Telecom and RoadMain T 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 RoadMain T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and RoadMain T.

Diversification Opportunities for Gome Telecom and RoadMain T

0.62

Correlation Coefficient

Gome Telecom  RoadMain T

Poor diversification

The 3 months correlation between Gome and RoadMain is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T 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 RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Gome Telecom i.e., Gome Telecom and RoadMain T go up and down completely randomly.

Pair Corralation between Gome Telecom and RoadMain T

Assuming the 90 days trading horizon Gome Telecom Equipment is expected to under-perform the RoadMain T. In addition to that, Gome Telecom is 1.01 times more volatile than RoadMain T Co. It trades about -0.67 of its total potential returns per unit of risk. RoadMain T Co is currently generating about -0.06 per unit of volatility. If you would invest  3,213  in RoadMain T Co on December 2, 2024 and sell it today you would lose (314.00) from holding RoadMain T Co or give up 9.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Gome Telecom Equipment  vs.  RoadMain T Co

Gome Telecom Equipment

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RoadMain T

Risk-Adjusted Performance

Very Weak

Over the last 90 days RoadMain T Co 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.

Pair Trading with Gome Telecom and RoadMain T

The main advantage of trading using opposite Gome Telecom and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gome Telecom position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Gome Telecom Equipment and RoadMain T 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.