Correlation Between G8 Education and C29 Metals

Can any of the company-specific risk be diversified away by investing in both G8 Education and C29 Metals 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 G8 Education and C29 Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 Education and C29 Metals, you can compare the effects of market volatilities on G8 Education and C29 Metals 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 G8 Education with a short position of C29 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and C29 Metals.

Diversification Opportunities for G8 Education and C29 Metals

0.21

Correlation Coefficient

G8 Education  C29 Metals

Modest diversification

The 3 months correlation between GEM and C29 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and C29 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C29 Metals and G8 Education 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 G8 Education are associated (or correlated) with C29 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C29 Metals has no effect on the direction of G8 Education i.e., G8 Education and C29 Metals go up and down completely randomly.

Pair Corralation between G8 Education and C29 Metals

Assuming the 90 days trading horizon G8 Education is expected to generate 25.65 times less return on investment than C29 Metals. But when comparing it to its historical volatility, G8 Education is 4.85 times less risky than C29 Metals. It trades about 0.01 of its potential returns per unit of risk. C29 Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.50  in C29 Metals on December 27, 2024 and sell it today you would earn a total of  0.10  from holding C29 Metals or generate 1.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

G8 Education  vs.  C29 Metals

G8 Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days G8 Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, G8 Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

C29 Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in C29 Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, C29 Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G8 Education and C29 Metals

The main advantage of trading using opposite G8 Education and C29 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, C29 Metals 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 C29 Metals will offset losses from the drop in C29 Metals' long position.

The idea behind G8 Education and C29 Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.