Correlation Between GDS Holdings and Entergy New

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

By analyzing existing cross correlation between GDS Holdings and Entergy New Orleans, you can compare the effects of market volatilities on GDS Holdings and Entergy New 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 GDS Holdings with a short position of Entergy New. Check out your portfolio center. Please also check ongoing floating volatility patterns of GDS Holdings and Entergy New.

Diversification Opportunities for GDS Holdings and Entergy New

-0.12

Correlation Coefficient

GDS Holdings  Entergy New

Good diversification

The 3 months correlation between GDS and Entergy is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding GDS Holdings and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans and GDS 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 GDS Holdings are associated (or correlated) with Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of GDS Holdings i.e., GDS Holdings and Entergy New go up and down completely randomly.

Pair Corralation between GDS Holdings and Entergy New

Considering the 90-day investment horizon GDS Holdings is expected to generate 9.21 times more return on investment than Entergy New. However, GDS Holdings is 9.21 times more volatile than Entergy New Orleans. It trades about 0.07 of its potential returns per unit of risk. Entergy New Orleans is currently generating about 0.01 per unit of risk. If you would invest  2,229  in GDS Holdings on December 27, 2024 and sell it today you would earn a total of  388.00  from holding GDS Holdings or generate 17.41% return on investment over 90 days.

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

GDS Holdings  vs.  Entergy New Orleans

GDS Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GDS Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, GDS Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Entergy New Orleans

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GDS Holdings and Entergy New

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

The idea behind GDS Holdings and Entergy New Orleans 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.