Correlation Between GungHo Online and La-Z-Boy Incorporated

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

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

Diversification Opportunities for GungHo Online and La-Z-Boy Incorporated

-0.35

Correlation Coefficient

GungHo Online  La-Z-Boy Incorporated

Very good diversification

The 3 months correlation between GungHo and La-Z-Boy is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La-Z-Boy Incorporated and GungHo Online 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 GungHo Online Entertainment are associated (or correlated) with La-Z-Boy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La-Z-Boy Incorporated has no effect on the direction of GungHo Online i.e., GungHo Online and La-Z-Boy Incorporated go up and down completely randomly.

Pair Corralation between GungHo Online and La-Z-Boy Incorporated

Assuming the 90 days horizon GungHo Online is expected to generate 2.05 times less return on investment than La-Z-Boy Incorporated. In addition to that, GungHo Online is 1.03 times more volatile than La Z Boy Incorporated. It trades about 0.03 of its total potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.06 per unit of volatility. If you would invest  2,460  in La Z Boy Incorporated on October 23, 2024 and sell it today you would earn a total of  1,860  from holding La Z Boy Incorporated or generate 75.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

GungHo Online Entertainment  vs.  La Z Boy Incorporated

GungHo Online Entert

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

La-Z-Boy Incorporated

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in La Z Boy Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, La-Z-Boy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GungHo Online and La-Z-Boy Incorporated

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

The idea behind GungHo Online Entertainment and La Z Boy Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.