Correlation Between MEGA METAL and GSD Holding

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

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

Diversification Opportunities for MEGA METAL and GSD Holding

0.61

Correlation Coefficient

MEGA METAL  GSD Holding

Poor diversification

The 3 months correlation between MEGA and GSD is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MEGA METAL and GSD Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSD Holding AS and MEGA METAL 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 MEGA METAL are associated (or correlated) with GSD Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSD Holding AS has no effect on the direction of MEGA METAL i.e., MEGA METAL and GSD Holding go up and down completely randomly.

Pair Corralation between MEGA METAL and GSD Holding

Assuming the 90 days trading horizon MEGA METAL is expected to generate 1.56 times more return on investment than GSD Holding. However, MEGA METAL is 1.56 times more volatile than GSD Holding AS. It trades about 0.02 of its potential returns per unit of risk. GSD Holding AS is currently generating about -0.04 per unit of risk. If you would invest  3,154  in MEGA METAL on October 4, 2024 and sell it today you would earn a total of  8.00  from holding MEGA METAL or generate 0.25% return on investment over 90 days.

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

MEGA METAL  vs.  GSD Holding AS

MEGA METAL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MEGA METAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, MEGA METAL is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

GSD Holding AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GSD Holding AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, GSD Holding may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MEGA METAL and GSD Holding

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

The idea behind MEGA METAL and GSD Holding AS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.