Correlation Between Gravity and REQ

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

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

Diversification Opportunities for Gravity and REQ

0.88

Correlation Coefficient

Gravity  REQ

Very poor diversification

The 3 months correlation between Gravity and REQ is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gravity and REQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REQ 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 REQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REQ has no effect on the direction of Gravity i.e., Gravity and REQ go up and down completely randomly.

Pair Corralation between Gravity and REQ

Given the investment horizon of 90 days Gravity is expected to under-perform the REQ. In addition to that, Gravity is 1.03 times more volatile than REQ. It trades about -0.12 of its total potential returns per unit of risk. REQ is currently generating about -0.02 per unit of volatility. If you would invest  14.00  in REQ on December 1, 2024 and sell it today you would lose (3.00) from holding REQ or give up 21.43% of portfolio value over 90 days.

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

Gravity  vs.  REQ

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.

REQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days REQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for REQ shareholders.

Pair Trading with Gravity and REQ

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

The idea behind Gravity and REQ 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.