Correlation Between Globe Union and Scan D

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

By analyzing existing cross correlation between Globe Union Industrial and Scan D, you can compare the effects of market volatilities on Globe Union and Scan D 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 Globe Union with a short position of Scan D. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Union and Scan D.

Diversification Opportunities for Globe Union and Scan D

0.63

Correlation Coefficient

Globe Union  Scan D

Poor diversification

The 3 months correlation between Globe and Scan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Globe Union Industrial and Scan D in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scan D and Globe Union 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 Globe Union Industrial are associated (or correlated) with Scan D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scan D has no effect on the direction of Globe Union i.e., Globe Union and Scan D go up and down completely randomly.

Pair Corralation between Globe Union and Scan D

Assuming the 90 days trading horizon Globe Union Industrial is expected to generate 1.07 times more return on investment than Scan D. However, Globe Union is 1.07 times more volatile than Scan D. It trades about -0.03 of its potential returns per unit of risk. Scan D is currently generating about -0.04 per unit of risk. If you would invest  1,395  in Globe Union Industrial on December 21, 2024 and sell it today you would lose (40.00) from holding Globe Union Industrial or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.21%
Values	Daily Returns

Globe Union Industrial  vs.  Scan D

Globe Union Industrial

Risk-Adjusted Performance

Very Weak

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

Scan D

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Globe Union and Scan D

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

The idea behind Globe Union Industrial and Scan D 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.