Correlation Between Giant Manufacturing and Alexander Marine

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

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

Diversification Opportunities for Giant Manufacturing and Alexander Marine

0.89

Correlation Coefficient

Giant Manufacturing  Alexander Marine

Very poor diversification

The 3 months correlation between Giant and Alexander is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Alexander Marine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alexander Marine and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Alexander Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alexander Marine has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Alexander Marine go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Alexander Marine

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to generate 0.78 times more return on investment than Alexander Marine. However, Giant Manufacturing Co is 1.29 times less risky than Alexander Marine. It trades about -0.18 of its potential returns per unit of risk. Alexander Marine Co is currently generating about -0.25 per unit of risk. If you would invest  18,550  in Giant Manufacturing Co on October 20, 2024 and sell it today you would lose (3,950) from holding Giant Manufacturing Co or give up 21.29% of portfolio value over 90 days.

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

Giant Manufacturing Co  vs.  Alexander Marine Co

Giant Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giant Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Alexander Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexander Marine Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Giant Manufacturing and Alexander Marine

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

The idea behind Giant Manufacturing Co and Alexander Marine 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.