Correlation Between Gear4music (Holdings) and AcadeMedia

Can any of the company-specific risk be diversified away by investing in both Gear4music (Holdings) and AcadeMedia 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 Gear4music (Holdings) and AcadeMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and AcadeMedia AB, you can compare the effects of market volatilities on Gear4music (Holdings) and AcadeMedia 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 Gear4music (Holdings) with a short position of AcadeMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music (Holdings) and AcadeMedia.

Diversification Opportunities for Gear4music (Holdings) and AcadeMedia

-0.77

Correlation Coefficient

Gear4music (Holdings)  AcadeMedia

Pay attention - limited upside

The 3 months correlation between Gear4music and AcadeMedia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and AcadeMedia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AcadeMedia AB and Gear4music (Holdings) 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 Gear4music Plc are associated (or correlated) with AcadeMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AcadeMedia AB has no effect on the direction of Gear4music (Holdings) i.e., Gear4music (Holdings) and AcadeMedia go up and down completely randomly.

Pair Corralation between Gear4music (Holdings) and AcadeMedia

Assuming the 90 days trading horizon Gear4music Plc is expected to under-perform the AcadeMedia. But the stock apears to be less risky and, when comparing its historical volatility, Gear4music Plc is 1.03 times less risky than AcadeMedia. The stock trades about -0.25 of its potential returns per unit of risk. The AcadeMedia AB is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,735  in AcadeMedia AB on December 27, 2024 and sell it today you would earn a total of  1,355  from holding AcadeMedia AB or generate 20.12% return on investment over 90 days.

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

Gear4music Plc  vs.  AcadeMedia AB

Gear4music (Holdings)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and 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 the firm shareholders.

AcadeMedia AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AcadeMedia AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AcadeMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gear4music (Holdings) and AcadeMedia

The main advantage of trading using opposite Gear4music (Holdings) and AcadeMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music (Holdings) position performs unexpectedly, AcadeMedia 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 AcadeMedia will offset losses from the drop in AcadeMedia's long position.

The idea behind Gear4music Plc and AcadeMedia AB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.