Correlation Between Generation Capital and Big Tech

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

By analyzing existing cross correlation between Generation Capital and Big Tech 50, you can compare the effects of market volatilities on Generation Capital and Big Tech 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 Generation Capital with a short position of Big Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generation Capital and Big Tech.

Diversification Opportunities for Generation Capital and Big Tech

-0.81

Correlation Coefficient

Generation Capital  Big Tech

Pay attention - limited upside

The 3 months correlation between Generation and Big is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Generation Capital and Big Tech 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tech 50 and Generation Capital 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 Generation Capital are associated (or correlated) with Big Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tech 50 has no effect on the direction of Generation Capital i.e., Generation Capital and Big Tech go up and down completely randomly.

Pair Corralation between Generation Capital and Big Tech

Assuming the 90 days trading horizon Generation Capital is expected to generate 1.21 times more return on investment than Big Tech. However, Generation Capital is 1.21 times more volatile than Big Tech 50. It trades about 0.1 of its potential returns per unit of risk. Big Tech 50 is currently generating about -0.25 per unit of risk. If you would invest  7,070  in Generation Capital on November 28, 2024 and sell it today you would earn a total of  850.00  from holding Generation Capital or generate 12.02% return on investment over 90 days.

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

Generation Capital  vs.  Big Tech 50

Generation Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Generation Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Big Tech 50

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Tech 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Generation Capital and Big Tech

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

The idea behind Generation Capital and Big Tech 50 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.