Correlation Between G Capital and ARIP Public

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

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

Diversification Opportunities for G Capital and ARIP Public

0.74

Correlation Coefficient

G Capital  ARIP Public

Poor diversification

The 3 months correlation between GCAP and ARIP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding G Capital Public and ARIP Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARIP Public and G Capital 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 G Capital Public are associated (or correlated) with ARIP Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARIP Public has no effect on the direction of G Capital i.e., G Capital and ARIP Public go up and down completely randomly.

Pair Corralation between G Capital and ARIP Public

Assuming the 90 days trading horizon G Capital is expected to generate 1.05 times less return on investment than ARIP Public. In addition to that, G Capital is 1.0 times more volatile than ARIP Public. It trades about 0.12 of its total potential returns per unit of risk. ARIP Public is currently generating about 0.13 per unit of volatility. If you would invest  0.00  in ARIP Public on September 3, 2024 and sell it today you would earn a total of  59.00  from holding ARIP Public or generate 9.223372036854776E16% return on investment over 90 days.

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

G Capital Public  vs.  ARIP Public

G Capital Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G Capital Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, G Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

ARIP Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARIP Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ARIP Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G Capital and ARIP Public

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

The idea behind G Capital Public and ARIP Public 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.