Correlation Between GMO Internet and Akamai Technologies

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

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

Diversification Opportunities for GMO Internet and Akamai Technologies

-0.04

Correlation Coefficient

GMO Internet  Akamai Technologies

Good diversification

The 3 months correlation between GMO and Akamai is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies and GMO Internet 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 GMO Internet are associated (or correlated) with Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of GMO Internet i.e., GMO Internet and Akamai Technologies go up and down completely randomly.

Pair Corralation between GMO Internet and Akamai Technologies

Assuming the 90 days horizon GMO Internet is expected to under-perform the Akamai Technologies. In addition to that, GMO Internet is 1.25 times more volatile than Akamai Technologies. It trades about -0.17 of its total potential returns per unit of risk. Akamai Technologies is currently generating about -0.18 per unit of volatility. If you would invest  9,236  in Akamai Technologies on October 10, 2024 and sell it today you would lose (374.00) from holding Akamai Technologies or give up 4.05% of portfolio value over 90 days.

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

GMO Internet  vs.  Akamai Technologies

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Akamai Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GMO Internet and Akamai Technologies

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

The idea behind GMO Internet and Akamai Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.