Correlation Between GMX and Near

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

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

Diversification Opportunities for GMX and Near

0.76

Correlation Coefficient

GMX  Near

Poor diversification

The 3 months correlation between GMX and Near is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GMX and Near in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near and GMX 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 GMX are associated (or correlated) with Near. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near has no effect on the direction of GMX i.e., GMX and Near go up and down completely randomly.

Pair Corralation between GMX and Near

Assuming the 90 days trading horizon GMX is expected to generate 2.22 times less return on investment than Near. But when comparing it to its historical volatility, GMX is 1.02 times less risky than Near. It trades about 0.1 of its potential returns per unit of risk. Near is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Near on September 1, 2024 and sell it today you would earn a total of  322.00  from holding Near or generate 86.56% return on investment over 90 days.

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

GMX  vs.  Near

GMX

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GMX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Near

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMX and Near

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

The idea behind GMX and Near 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.