Correlation Between DICKS Sporting and GungHo Online

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

By analyzing existing cross correlation between DICKS Sporting Goods and GungHo Online Entertainment, you can compare the effects of market volatilities on DICKS Sporting and GungHo Online 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 DICKS Sporting with a short position of GungHo Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of DICKS Sporting and GungHo Online.

Diversification Opportunities for DICKS Sporting and GungHo Online

0.61

Correlation Coefficient

DICKS Sporting  GungHo Online

Poor diversification

The 3 months correlation between DICKS and GungHo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert and DICKS Sporting 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 DICKS Sporting Goods are associated (or correlated) with GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of DICKS Sporting i.e., DICKS Sporting and GungHo Online go up and down completely randomly.

Pair Corralation between DICKS Sporting and GungHo Online

Assuming the 90 days horizon DICKS Sporting Goods is expected to under-perform the GungHo Online. In addition to that, DICKS Sporting is 1.03 times more volatile than GungHo Online Entertainment. It trades about -0.13 of its total potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.04 per unit of volatility. If you would invest  1,910  in GungHo Online Entertainment on December 11, 2024 and sell it today you would lose (90.00) from holding GungHo Online Entertainment or give up 4.71% of portfolio value over 90 days.

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

DICKS Sporting Goods  vs.  GungHo Online Entertainment

DICKS Sporting Goods

Risk-Adjusted Performance

Very Weak

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

GungHo Online Entert

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DICKS Sporting and GungHo Online

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

The idea behind DICKS Sporting Goods and GungHo Online Entertainment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.