Correlation Between GAMING FAC and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both GAMING FAC and GEAR4MUSIC 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 GAMING FAC and GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GAMING FAC SA and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on GAMING FAC and GEAR4MUSIC 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 GAMING FAC with a short position of GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMING FAC and GEAR4MUSIC.

Diversification Opportunities for GAMING FAC and GEAR4MUSIC

-0.14

Correlation Coefficient

GAMING FAC  GEAR4MUSIC

Good diversification

The 3 months correlation between GAMING and GEAR4MUSIC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 and GAMING FAC 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 GAMING FAC SA are associated (or correlated) with GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of GAMING FAC i.e., GAMING FAC and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between GAMING FAC and GEAR4MUSIC

Assuming the 90 days horizon GAMING FAC is expected to generate 1.02 times less return on investment than GEAR4MUSIC. In addition to that, GAMING FAC is 1.18 times more volatile than GEAR4MUSIC LS 10. It trades about 0.03 of its total potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.04 per unit of volatility. If you would invest  104.00  in GEAR4MUSIC LS 10 on October 25, 2024 and sell it today you would earn a total of  50.00  from holding GEAR4MUSIC LS 10 or generate 48.08% return on investment over 90 days.

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

GAMING FAC SA  vs.  GEAR4MUSIC LS 10

GAMING FAC SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAMING FAC SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GAMING FAC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GAMING FAC and GEAR4MUSIC

The main advantage of trading using opposite GAMING FAC and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMING FAC position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind GAMING FAC SA and GEAR4MUSIC LS 10 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.