Correlation Between GSR II and Cuentas

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

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

Diversification Opportunities for GSR II and Cuentas

0.41

Correlation Coefficient

GSR II  Cuentas

Very weak diversification

The 3 months correlation between GSR and Cuentas is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding GSR II Meteora and Cuentas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cuentas and GSR II 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 GSR II Meteora are associated (or correlated) with Cuentas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cuentas has no effect on the direction of GSR II i.e., GSR II and Cuentas go up and down completely randomly.

Pair Corralation between GSR II and Cuentas

Given the investment horizon of 90 days GSR II Meteora is expected to under-perform the Cuentas. But the stock apears to be less risky and, when comparing its historical volatility, GSR II Meteora is 6.81 times less risky than Cuentas. The stock trades about -0.16 of its potential returns per unit of risk. The Cuentas is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.49  in Cuentas on September 4, 2024 and sell it today you would lose (3.49) from holding Cuentas or give up 53.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	59.85%
Values	Daily Returns

GSR II Meteora  vs.  Cuentas

GSR II Meteora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSR II Meteora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, GSR II is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cuentas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cuentas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cuentas is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GSR II and Cuentas

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

The idea behind GSR II Meteora and Cuentas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.