Correlation Between Gamma Communications and Innovative Industrial

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

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

Diversification Opportunities for Gamma Communications and Innovative Industrial

0.76

Correlation Coefficient

Gamma Communications  Innovative Industrial

Poor diversification

The 3 months correlation between Gamma and Innovative is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Innovative Industrial Properti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Industrial and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Innovative Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Industrial has no effect on the direction of Gamma Communications i.e., Gamma Communications and Innovative Industrial go up and down completely randomly.

Pair Corralation between Gamma Communications and Innovative Industrial

Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 0.21 times more return on investment than Innovative Industrial. However, Gamma Communications PLC is 4.72 times less risky than Innovative Industrial. It trades about -0.43 of its potential returns per unit of risk. Innovative Industrial Properties is currently generating about -0.38 per unit of risk. If you would invest  162,000  in Gamma Communications PLC on October 11, 2024 and sell it today you would lose (15,600) from holding Gamma Communications PLC or give up 9.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Gamma Communications PLC  vs.  Innovative Industrial Properti

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gamma Communications and Innovative Industrial

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

The idea behind Gamma Communications PLC and Innovative Industrial Properties 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.