Correlation Between Grand Fortune and Good Finance

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

By analyzing existing cross correlation between Grand Fortune Securities and Good Finance Securities, you can compare the effects of market volatilities on Grand Fortune and Good Finance 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 Grand Fortune with a short position of Good Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Fortune and Good Finance.

Diversification Opportunities for Grand Fortune and Good Finance

0.35

Correlation Coefficient

Grand Fortune  Good Finance

Weak diversification

The 3 months correlation between Grand and Good is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Grand Fortune Securities and Good Finance Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Finance Securities and Grand Fortune 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 Grand Fortune Securities are associated (or correlated) with Good Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Finance Securities has no effect on the direction of Grand Fortune i.e., Grand Fortune and Good Finance go up and down completely randomly.

Pair Corralation between Grand Fortune and Good Finance

Assuming the 90 days trading horizon Grand Fortune Securities is expected to under-perform the Good Finance. But the stock apears to be less risky and, when comparing its historical volatility, Grand Fortune Securities is 1.03 times less risky than Good Finance. The stock trades about -0.31 of its potential returns per unit of risk. The Good Finance Securities is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,455  in Good Finance Securities on September 18, 2024 and sell it today you would lose (75.00) from holding Good Finance Securities or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Grand Fortune Securities  vs.  Good Finance Securities

Grand Fortune Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Fortune Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grand Fortune is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Good Finance Securities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Finance Securities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Good Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grand Fortune and Good Finance

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

The idea behind Grand Fortune Securities and Good Finance Securities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.