Correlation Between GMO Internet and Sphere Entertainment

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

By analyzing existing cross correlation between GMO Internet and Sphere Entertainment Co, you can compare the effects of market volatilities on GMO Internet and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Sphere Entertainment.

Diversification Opportunities for GMO Internet and Sphere Entertainment

-0.39

Correlation Coefficient

GMO Internet  Sphere Entertainment

Very good diversification

The 3 months correlation between GMO and Sphere is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of GMO Internet i.e., GMO Internet and Sphere Entertainment go up and down completely randomly.

Pair Corralation between GMO Internet and Sphere Entertainment

Assuming the 90 days horizon GMO Internet is expected to generate 0.76 times more return on investment than Sphere Entertainment. However, GMO Internet is 1.32 times less risky than Sphere Entertainment. It trades about -0.01 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.02 per unit of risk. If you would invest  1,859  in GMO Internet on October 25, 2024 and sell it today you would lose (164.00) from holding GMO Internet or give up 8.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.63%
Values	Daily Returns

GMO Internet  vs.  Sphere Entertainment Co

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMO Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GMO Internet and Sphere Entertainment

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

The idea behind GMO Internet and Sphere Entertainment Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.