Correlation Between GXC and Terra

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

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

Diversification Opportunities for GXC and Terra

0.0

Correlation Coefficient

GXC  Terra

Pay attention - limited upside

The 3 months correlation between GXC and Terra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GXC and Terra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terra and GXC 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 GXC are associated (or correlated) with Terra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terra has no effect on the direction of GXC i.e., GXC and Terra go up and down completely randomly.

Pair Corralation between GXC and Terra

If you would invest  47.00  in Terra on September 25, 2024 and sell it today you would lose (2.00) from holding Terra or give up 4.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

GXC  vs.  Terra

GXC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Terra

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Terra are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Terra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GXC and Terra

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

The idea behind GXC and Terra 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.