Correlation Between Globalfoundries and New Era

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

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

Diversification Opportunities for Globalfoundries and New Era

0.33

Correlation Coefficient

Globalfoundries  New Era

Weak diversification

The 3 months correlation between Globalfoundries and New is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium and Globalfoundries 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 Globalfoundries are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Globalfoundries i.e., Globalfoundries and New Era go up and down completely randomly.

Pair Corralation between Globalfoundries and New Era

Considering the 90-day investment horizon Globalfoundries is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Globalfoundries is 5.9 times less risky than New Era. The stock trades about -0.06 of its potential returns per unit of risk. The New Era Helium is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19.00  in New Era Helium on December 23, 2024 and sell it today you would lose (3.00) from holding New Era Helium or give up 15.79% of portfolio value over 90 days.

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

Globalfoundries  vs.  New Era Helium

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

New Era Helium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Era Helium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, New Era showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globalfoundries and New Era

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

The idea behind Globalfoundries and New Era Helium 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..