Correlation Between Faction Investment and GGL Resources

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

By analyzing existing cross correlation between Faction Investment Group and GGL Resources Corp, you can compare the effects of market volatilities on Faction Investment and GGL Resources 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 Faction Investment with a short position of GGL Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faction Investment and GGL Resources.

Diversification Opportunities for Faction Investment and GGL Resources

-0.23

Correlation Coefficient

Faction Investment  GGL Resources

Very good diversification

The 3 months correlation between Faction and GGL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Faction Investment Group and GGL Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GGL Resources Corp and Faction Investment 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 Faction Investment Group are associated (or correlated) with GGL Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GGL Resources Corp has no effect on the direction of Faction Investment i.e., Faction Investment and GGL Resources go up and down completely randomly.

Pair Corralation between Faction Investment and GGL Resources

Assuming the 90 days trading horizon Faction Investment Group is expected to generate 2.44 times more return on investment than GGL Resources. However, Faction Investment is 2.44 times more volatile than GGL Resources Corp. It trades about 0.13 of its potential returns per unit of risk. GGL Resources Corp is currently generating about 0.19 per unit of risk. If you would invest  1.50  in Faction Investment Group on December 21, 2024 and sell it today you would earn a total of  3.50  from holding Faction Investment Group or generate 233.33% return on investment over 90 days.

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

Faction Investment Group  vs.  GGL Resources Corp

Faction Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faction Investment Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Faction Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

GGL Resources Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GGL Resources Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, GGL Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faction Investment and GGL Resources

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

The idea behind Faction Investment Group and GGL Resources Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.