Correlation Between GROUNDS REST and MICRONIC MYDATA

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

By analyzing existing cross correlation between GROUNDS REST NA and MICRONIC MYDATA, you can compare the effects of market volatilities on GROUNDS REST and MICRONIC MYDATA 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 GROUNDS REST with a short position of MICRONIC MYDATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GROUNDS REST and MICRONIC MYDATA.

Diversification Opportunities for GROUNDS REST and MICRONIC MYDATA

-0.07

Correlation Coefficient

GROUNDS REST  MICRONIC MYDATA

Good diversification

The 3 months correlation between GROUNDS and MICRONIC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding GROUNDS REST NA and MICRONIC MYDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICRONIC MYDATA and GROUNDS REST 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 GROUNDS REST NA are associated (or correlated) with MICRONIC MYDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MICRONIC MYDATA has no effect on the direction of GROUNDS REST i.e., GROUNDS REST and MICRONIC MYDATA go up and down completely randomly.

Pair Corralation between GROUNDS REST and MICRONIC MYDATA

Assuming the 90 days trading horizon GROUNDS REST NA is expected to generate 3.05 times more return on investment than MICRONIC MYDATA. However, GROUNDS REST is 3.05 times more volatile than MICRONIC MYDATA. It trades about 0.15 of its potential returns per unit of risk. MICRONIC MYDATA is currently generating about 0.1 per unit of risk. If you would invest  96.00  in GROUNDS REST NA on October 23, 2024 and sell it today you would earn a total of  60.00  from holding GROUNDS REST NA or generate 62.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

GROUNDS REST NA  vs.  MICRONIC MYDATA

GROUNDS REST NA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GROUNDS REST NA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, GROUNDS REST reported solid returns over the last few months and may actually be approaching a breakup point.

MICRONIC MYDATA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MICRONIC MYDATA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, MICRONIC MYDATA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GROUNDS REST and MICRONIC MYDATA

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

The idea behind GROUNDS REST NA and MICRONIC MYDATA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.