Correlation Between G Tec and Rainbow Childrens

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

By analyzing existing cross correlation between G Tec Jainx Education and Rainbow Childrens Medicare, you can compare the effects of market volatilities on G Tec and Rainbow Childrens 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 G Tec with a short position of Rainbow Childrens. Check out your portfolio center. Please also check ongoing floating volatility patterns of G Tec and Rainbow Childrens.

Diversification Opportunities for G Tec and Rainbow Childrens

0.56

Correlation Coefficient

G Tec  Rainbow Childrens

Very weak diversification

The 3 months correlation between GTECJAINX and Rainbow is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding G Tec Jainx Education and Rainbow Childrens Medicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Childrens and G Tec 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 G Tec Jainx Education are associated (or correlated) with Rainbow Childrens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Childrens has no effect on the direction of G Tec i.e., G Tec and Rainbow Childrens go up and down completely randomly.

Pair Corralation between G Tec and Rainbow Childrens

Assuming the 90 days trading horizon G Tec Jainx Education is expected to under-perform the Rainbow Childrens. In addition to that, G Tec is 1.36 times more volatile than Rainbow Childrens Medicare. It trades about -0.07 of its total potential returns per unit of risk. Rainbow Childrens Medicare is currently generating about -0.08 per unit of volatility. If you would invest  150,135  in Rainbow Childrens Medicare on December 25, 2024 and sell it today you would lose (15,990) from holding Rainbow Childrens Medicare or give up 10.65% of portfolio value over 90 days.

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

G Tec Jainx Education  vs.  Rainbow Childrens Medicare

G Tec Jainx

Risk-Adjusted Performance

Very Weak

Over the last 90 days G Tec Jainx Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Rainbow Childrens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rainbow Childrens Medicare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with G Tec and Rainbow Childrens

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

The idea behind G Tec Jainx Education and Rainbow Childrens Medicare 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.