Correlation Between Global Power and Ratch Group

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

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

Diversification Opportunities for Global Power and Ratch Group

0.03

Correlation Coefficient

Global Power  Ratch Group

Significant diversification

The 3 months correlation between Global and Ratch is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Global Power Synergy and Ratch Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratch Group Public and Global Power 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 Global Power Synergy are associated (or correlated) with Ratch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratch Group Public has no effect on the direction of Global Power i.e., Global Power and Ratch Group go up and down completely randomly.

Pair Corralation between Global Power and Ratch Group

Assuming the 90 days trading horizon Global Power Synergy is expected to under-perform the Ratch Group. In addition to that, Global Power is 1.42 times more volatile than Ratch Group Public. It trades about -0.42 of its total potential returns per unit of risk. Ratch Group Public is currently generating about -0.06 per unit of volatility. If you would invest  3,050  in Ratch Group Public on September 24, 2024 and sell it today you would lose (50.00) from holding Ratch Group Public or give up 1.64% of portfolio value over 90 days.

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

Global Power Synergy  vs.  Ratch Group Public

Global Power Synergy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Power Synergy 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ratch Group Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ratch Group Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Ratch Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Power and Ratch Group

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

The idea behind Global Power Synergy and Ratch Group Public 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.