Correlation Between Gencell and Payton L

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

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

Diversification Opportunities for Gencell and Payton L

0.23

Correlation Coefficient

Gencell  Payton L

Modest diversification

The 3 months correlation between Gencell and Payton is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gencell and Payton L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payton L and Gencell 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 Gencell are associated (or correlated) with Payton L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payton L has no effect on the direction of Gencell i.e., Gencell and Payton L go up and down completely randomly.

Pair Corralation between Gencell and Payton L

Assuming the 90 days trading horizon Gencell is expected to generate 2.09 times more return on investment than Payton L. However, Gencell is 2.09 times more volatile than Payton L. It trades about 0.06 of its potential returns per unit of risk. Payton L is currently generating about 0.06 per unit of risk. If you would invest  5,230  in Gencell on October 20, 2024 and sell it today you would earn a total of  540.00  from holding Gencell or generate 10.33% return on investment over 90 days.

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

Gencell  vs.  Payton L

Gencell

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gencell are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gencell sustained solid returns over the last few months and may actually be approaching a breakup point.

Payton L

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Payton L are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Payton L may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gencell and Payton L

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

The idea behind Gencell and Payton L 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.