Correlation Between GD Culture and SohuCom

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

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

Diversification Opportunities for GD Culture and SohuCom

0.39

Correlation Coefficient

GD Culture  SohuCom

Weak diversification

The 3 months correlation between GDC and SohuCom is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding GD Culture Group and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom and GD Culture 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 GD Culture Group are associated (or correlated) with SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of GD Culture i.e., GD Culture and SohuCom go up and down completely randomly.

Pair Corralation between GD Culture and SohuCom

Considering the 90-day investment horizon GD Culture Group is expected to under-perform the SohuCom. In addition to that, GD Culture is 4.05 times more volatile than SohuCom. It trades about -0.11 of its total potential returns per unit of risk. SohuCom is currently generating about -0.03 per unit of volatility. If you would invest  1,489  in SohuCom on September 14, 2024 and sell it today you would lose (90.00) from holding SohuCom or give up 6.04% of portfolio value over 90 days.

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

GD Culture Group  vs.  SohuCom

GD Culture Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GD Culture Group 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SohuCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SohuCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, SohuCom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GD Culture and SohuCom

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

The idea behind GD Culture Group and SohuCom 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.