Correlation Between GDI Integrated and Roots Corp

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

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

Diversification Opportunities for GDI Integrated and Roots Corp

0.24

Correlation Coefficient

GDI Integrated  Roots Corp

Modest diversification

The 3 months correlation between GDI and Roots is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding GDI Integrated and Roots Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roots Corp and GDI Integrated 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 GDI Integrated are associated (or correlated) with Roots Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roots Corp has no effect on the direction of GDI Integrated i.e., GDI Integrated and Roots Corp go up and down completely randomly.

Pair Corralation between GDI Integrated and Roots Corp

Assuming the 90 days trading horizon GDI Integrated is expected to generate 0.74 times more return on investment than Roots Corp. However, GDI Integrated is 1.35 times less risky than Roots Corp. It trades about 0.06 of its potential returns per unit of risk. Roots Corp is currently generating about 0.02 per unit of risk. If you would invest  3,160  in GDI Integrated on October 13, 2024 and sell it today you would earn a total of  470.00  from holding GDI Integrated or generate 14.87% return on investment over 90 days.

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

GDI Integrated  vs.  Roots Corp

GDI Integrated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GDI Integrated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, GDI Integrated is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Roots Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roots Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Roots Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GDI Integrated and Roots Corp

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

The idea behind GDI Integrated and Roots Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..