Correlation Between GMO Internet and INTERNET INJPADR

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

By analyzing existing cross correlation between GMO Internet and INTERNET INJPADR 1, you can compare the effects of market volatilities on GMO Internet and INTERNET INJPADR 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 INTERNET INJPADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and INTERNET INJPADR.

Diversification Opportunities for GMO Internet and INTERNET INJPADR

0.57

Correlation Coefficient

GMO Internet  INTERNET INJPADR

Very weak diversification

The 3 months correlation between GMO and INTERNET is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and INTERNET INJPADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNET INJPADR 1 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 INTERNET INJPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNET INJPADR 1 has no effect on the direction of GMO Internet i.e., GMO Internet and INTERNET INJPADR go up and down completely randomly.

Pair Corralation between GMO Internet and INTERNET INJPADR

Assuming the 90 days horizon GMO Internet is expected to generate 0.83 times more return on investment than INTERNET INJPADR. However, GMO Internet is 1.21 times less risky than INTERNET INJPADR. It trades about -0.17 of its potential returns per unit of risk. INTERNET INJPADR 1 is currently generating about -0.28 per unit of risk. If you would invest  1,710  in GMO Internet on October 10, 2024 and sell it today you would lose (80.00) from holding GMO Internet or give up 4.68% of portfolio value over 90 days.

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

GMO Internet  vs.  INTERNET INJPADR 1

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.

INTERNET INJPADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNET INJPADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INTERNET INJPADR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GMO Internet and INTERNET INJPADR

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

The idea behind GMO Internet and INTERNET INJPADR 1 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 Stocks Directory module to find actively traded stocks across global markets.