Correlation Between GMM Grammy and BEC World

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

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

Diversification Opportunities for GMM Grammy and BEC World

0.06

Correlation Coefficient

GMM Grammy  BEC World

Significant diversification

The 3 months correlation between GMM and BEC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding GMM Grammy Public and BEC World Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEC World Public and GMM Grammy 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 GMM Grammy Public are associated (or correlated) with BEC World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEC World Public has no effect on the direction of GMM Grammy i.e., GMM Grammy and BEC World go up and down completely randomly.

Pair Corralation between GMM Grammy and BEC World

Assuming the 90 days trading horizon GMM Grammy Public is expected to under-perform the BEC World. But the stock apears to be less risky and, when comparing its historical volatility, GMM Grammy Public is 1.61 times less risky than BEC World. The stock trades about -0.07 of its potential returns per unit of risk. The BEC World Public is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  414.00  in BEC World Public on October 26, 2024 and sell it today you would lose (8.00) from holding BEC World Public or give up 1.93% of portfolio value over 90 days.

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

GMM Grammy Public  vs.  BEC World Public

GMM Grammy Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMM Grammy Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GMM Grammy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BEC World Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEC World Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, BEC World is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GMM Grammy and BEC World

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

The idea behind GMM Grammy Public and BEC World 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 Global Correlations module to find global opportunities by holding instruments from different markets.