Correlation Between Global E and DriveItAway

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Can any of the company-specific risk be diversified away by investing in both Global E and DriveItAway 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 Global E and DriveItAway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and DriveItAway, you can compare the effects of market volatilities on Global E and DriveItAway 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 Global E with a short position of DriveItAway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and DriveItAway.

Diversification Opportunities for Global E and DriveItAway

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Global and DriveItAway is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and DriveItAway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DriveItAway and Global E 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 Global E Online are associated (or correlated) with DriveItAway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DriveItAway has no effect on the direction of Global E i.e., Global E and DriveItAway go up and down completely randomly.

Pair Corralation between Global E and DriveItAway

Given the investment horizon of 90 days Global E Online is expected to generate 0.16 times more return on investment than DriveItAway. However, Global E Online is 6.35 times less risky than DriveItAway. It trades about 0.28 of its potential returns per unit of risk. DriveItAway is currently generating about -0.05 per unit of risk. If you would invest  3,780  in Global E Online on September 17, 2024 and sell it today you would earn a total of  1,866  from holding Global E Online or generate 49.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Global E Online  vs.  DriveItAway

 Performance 
       Timeline  
Global E Online 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.
DriveItAway 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DriveItAway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Global E and DriveItAway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global E and DriveItAway

The main advantage of trading using opposite Global E and DriveItAway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, DriveItAway 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 DriveItAway will offset losses from the drop in DriveItAway's long position.
The idea behind Global E Online and DriveItAway 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.
Check out your portfolio center.
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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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