Correlation Between Gravity and REN

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

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

Diversification Opportunities for Gravity and REN

0.91

Correlation Coefficient

Gravity  REN

Almost no diversification

The 3 months correlation between Gravity and REN is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gravity and REN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REN and Gravity 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 Gravity are associated (or correlated) with REN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REN has no effect on the direction of Gravity i.e., Gravity and REN go up and down completely randomly.

Pair Corralation between Gravity and REN

Given the investment horizon of 90 days Gravity is expected to generate 0.67 times more return on investment than REN. However, Gravity is 1.49 times less risky than REN. It trades about -0.14 of its potential returns per unit of risk. REN is currently generating about -0.16 per unit of risk. If you would invest  3.00  in Gravity on December 28, 2024 and sell it today you would lose (1.43) from holding Gravity or give up 47.67% of portfolio value over 90 days.

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

Gravity  vs.  REN

Gravity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gravity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Gravity shareholders.

REN

Risk-Adjusted Performance

Very Weak

Over the last 90 days REN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for REN shareholders.

Pair Trading with Gravity and REN

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

The idea behind Gravity and REN 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.