Correlation Between Terra and GXC

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

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

Diversification Opportunities for Terra and GXC

0.72

Correlation Coefficient

Terra  GXC

Poor diversification

The 3 months correlation between Terra and GXC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Terra and GXC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GXC and Terra 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 Terra are associated (or correlated) with GXC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GXC has no effect on the direction of Terra i.e., Terra and GXC go up and down completely randomly.

Pair Corralation between Terra and GXC

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	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Terra  vs.  GXC

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.

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.

Pair Trading with Terra and GXC

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

The idea behind Terra and GXC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.