Correlation Between Momentum Group and Goodbye Kansas

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

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

Diversification Opportunities for Momentum Group and Goodbye Kansas

-0.04

Correlation Coefficient

Momentum Group  Goodbye Kansas

Good diversification

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

Pair Corralation between Momentum Group and Goodbye Kansas

Assuming the 90 days trading horizon Momentum Group is expected to generate 11.94 times less return on investment than Goodbye Kansas. But when comparing it to its historical volatility, Momentum Group AB is 1.51 times less risky than Goodbye Kansas. It trades about 0.01 of its potential returns per unit of risk. Goodbye Kansas Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Goodbye Kansas Group on September 23, 2024 and sell it today you would earn a total of  8.00  from holding Goodbye Kansas Group or generate 5.76% return on investment over 90 days.

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

Momentum Group AB  vs.  Goodbye Kansas Group

Momentum Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Momentum Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Momentum Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Goodbye Kansas Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goodbye Kansas Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Goodbye Kansas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Momentum Group and Goodbye Kansas

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

The idea behind Momentum Group AB and Goodbye Kansas Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.