Correlation Between GOME Retail and American States

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

By analyzing existing cross correlation between GOME Retail Holdings and American States Water, you can compare the effects of market volatilities on GOME Retail and American States 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 GOME Retail with a short position of American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOME Retail and American States.

Diversification Opportunities for GOME Retail and American States

0.0

Correlation Coefficient

GOME Retail  American States

Pay attention - limited upside

The 3 months correlation between GOME and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GOME Retail Holdings and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and GOME Retail 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 GOME Retail Holdings are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of GOME Retail i.e., GOME Retail and American States go up and down completely randomly.

Pair Corralation between GOME Retail and American States

If you would invest  0.10  in GOME Retail Holdings on December 25, 2024 and sell it today you would earn a total of  0.00  from holding GOME Retail Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

GOME Retail Holdings  vs.  American States Water

GOME Retail Holdings

Risk-Adjusted Performance

Very Weak

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

American States Water

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GOME Retail and American States

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

The idea behind GOME Retail Holdings and American States Water 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.