Correlation Between GSC and SC

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

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

Diversification Opportunities for GSC and SC

0.31

Correlation Coefficient

GSC  SC

Weak diversification

The 3 months correlation between GSC and SC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding GSC and SC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SC and GSC 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 GSC are associated (or correlated) with SC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SC has no effect on the direction of GSC i.e., GSC and SC go up and down completely randomly.

Pair Corralation between GSC and SC

If you would invest  0.66  in SC on September 1, 2024 and sell it today you would earn a total of  0.06  from holding SC or generate 8.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.76%
Values	Daily Returns

GSC  vs.  SC

GSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, GSC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GSC and SC

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

The idea behind GSC and SC 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.