Correlation Between Cable One and GMO Internet

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

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

Diversification Opportunities for Cable One and GMO Internet

0.06

Correlation Coefficient

Cable One  GMO Internet

Significant diversification

The 3 months correlation between Cable and GMO is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Cable One 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 Cable One are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Cable One i.e., Cable One and GMO Internet go up and down completely randomly.

Pair Corralation between Cable One and GMO Internet

Given the investment horizon of 90 days Cable One is expected to under-perform the GMO Internet. In addition to that, Cable One is 1.01 times more volatile than GMO Internet. It trades about -0.32 of its total potential returns per unit of risk. GMO Internet is currently generating about -0.16 per unit of volatility. If you would invest  1,775  in GMO Internet on October 10, 2024 and sell it today you would lose (95.00) from holding GMO Internet or give up 5.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Cable One  vs.  GMO Internet

Cable One

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Cable One may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMO Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cable One and GMO Internet

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

The idea behind Cable One and GMO Internet 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.