Correlation Between Ruentex Development and GCS Holdings

Can any of the company-specific risk be diversified away by investing in both Ruentex Development and GCS Holdings 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 Ruentex Development and GCS Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ruentex Development and GCS Holdings

-0.7

Correlation Coefficient

Ruentex Development  GCS Holdings

Excellent diversification

The 3 months correlation between Ruentex and GCS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of Ruentex Development i.e., Ruentex Development and GCS Holdings go up and down completely randomly.

Pair Corralation between Ruentex Development and GCS Holdings

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the GCS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 3.7 times less risky than GCS Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The GCS Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,950  in GCS Holdings on September 15, 2024 and sell it today you would earn a total of  5,350  from holding GCS Holdings or generate 135.44% return on investment over 90 days.

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

Ruentex Development Co  vs.  GCS Holdings

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

GCS Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GCS Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GCS Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ruentex Development and GCS Holdings

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

The idea behind Ruentex Development Co and GCS Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.