Correlation Between Alpha and GSI Technology

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

By analyzing existing cross correlation between Alpha and Omega and GSI Technology, you can compare the effects of market volatilities on Alpha and GSI Technology 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 Alpha with a short position of GSI Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha and GSI Technology.

Diversification Opportunities for Alpha and GSI Technology

-0.08

Correlation Coefficient

Alpha  GSI Technology

Good diversification

The 3 months correlation between Alpha and GSI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology and Alpha 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 Alpha and Omega are associated (or correlated) with GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of Alpha i.e., Alpha and GSI Technology go up and down completely randomly.

Pair Corralation between Alpha and GSI Technology

Given the investment horizon of 90 days Alpha and Omega is expected to under-perform the GSI Technology. But the stock apears to be less risky and, when comparing its historical volatility, Alpha and Omega is 1.56 times less risky than GSI Technology. The stock trades about -0.08 of its potential returns per unit of risk. The GSI Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  330.00  in GSI Technology on November 28, 2024 and sell it today you would lose (31.00) from holding GSI Technology or give up 9.39% of portfolio value over 90 days.

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

Alpha and Omega  vs.  GSI Technology

Alpha and Omega

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GSI Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days GSI Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, GSI Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alpha and GSI Technology

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

The idea behind Alpha and Omega and GSI Technology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.