Correlation Between GMO Internet and AEON STORES

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

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

Diversification Opportunities for GMO Internet and AEON STORES

-0.09

Correlation Coefficient

GMO Internet  AEON STORES

Good diversification

The 3 months correlation between GMO and AEON is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and AEON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON STORES 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 AEON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON STORES has no effect on the direction of GMO Internet i.e., GMO Internet and AEON STORES go up and down completely randomly.

Pair Corralation between GMO Internet and AEON STORES

Assuming the 90 days horizon GMO Internet is expected to under-perform the AEON STORES. But the stock apears to be less risky and, when comparing its historical volatility, GMO Internet is 1.45 times less risky than AEON STORES. The stock trades about -0.2 of its potential returns per unit of risk. The AEON STORES is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  6.05  in AEON STORES on October 8, 2024 and sell it today you would lose (0.15) from holding AEON STORES or give up 2.48% 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.  AEON STORES

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 fragile basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GMO Internet and AEON STORES

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

The idea behind GMO Internet and AEON STORES 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.