Correlation Between City View and Galexxy Holdings

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

By analyzing existing cross correlation between City View Green and Galexxy Holdings, you can compare the effects of market volatilities on City View and Galexxy Holdings 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 City View with a short position of Galexxy Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of City View and Galexxy Holdings.

Diversification Opportunities for City View and Galexxy Holdings

0.03

Correlation Coefficient

City View  Galexxy Holdings

Significant diversification

The 3 months correlation between City and Galexxy is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding City View Green and Galexxy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galexxy Holdings and City View 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 City View Green are associated (or correlated) with Galexxy Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galexxy Holdings has no effect on the direction of City View i.e., City View and Galexxy Holdings go up and down completely randomly.

Pair Corralation between City View and Galexxy Holdings

Assuming the 90 days horizon City View is expected to generate 3.41 times less return on investment than Galexxy Holdings. But when comparing it to its historical volatility, City View Green is 2.13 times less risky than Galexxy Holdings. It trades about 0.07 of its potential returns per unit of risk. Galexxy Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.59  in Galexxy Holdings on December 29, 2024 and sell it today you would earn a total of  0.36  from holding Galexxy Holdings or generate 61.02% return on investment over 90 days.

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

City View Green  vs.  Galexxy Holdings

City View Green

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City View Green are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, City View reported solid returns over the last few months and may actually be approaching a breakup point.

Galexxy Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Galexxy Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Galexxy Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City View and Galexxy Holdings

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

The idea behind City View Green and Galexxy Holdings 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.