Correlation Between GMO Internet and Kodiak Gas

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

By analyzing existing cross correlation between GMO Internet and Kodiak Gas Services,, you can compare the effects of market volatilities on GMO Internet and Kodiak Gas 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 GMO Internet with a short position of Kodiak Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Kodiak Gas.

Diversification Opportunities for GMO Internet and Kodiak Gas

-0.64

Correlation Coefficient

GMO Internet  Kodiak Gas

Excellent diversification

The 3 months correlation between GMO and Kodiak is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, and GMO Internet 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 GMO Internet are associated (or correlated) with Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of GMO Internet i.e., GMO Internet and Kodiak Gas go up and down completely randomly.

Pair Corralation between GMO Internet and Kodiak Gas

Assuming the 90 days horizon GMO Internet is expected to generate 0.54 times more return on investment than Kodiak Gas. However, GMO Internet is 1.84 times less risky than Kodiak Gas. It trades about 0.18 of its potential returns per unit of risk. Kodiak Gas Services, is currently generating about 0.01 per unit of risk. If you would invest  1,741  in GMO Internet on December 19, 2024 and sell it today you would earn a total of  390.00  from holding GMO Internet or generate 22.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

GMO Internet  vs.  Kodiak Gas Services,

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Kodiak Gas Services,

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GMO Internet and Kodiak Gas

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

The idea behind GMO Internet and Kodiak Gas Services, 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.