Correlation Between New Tech and Globe Trade

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

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

Diversification Opportunities for New Tech and Globe Trade

0.33

Correlation Coefficient

New Tech  Globe Trade

Weak diversification

The 3 months correlation between New and Globe is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding New Tech Venture and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre and New Tech 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 New Tech Venture are associated (or correlated) with Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of New Tech i.e., New Tech and Globe Trade go up and down completely randomly.

Pair Corralation between New Tech and Globe Trade

Assuming the 90 days trading horizon New Tech Venture is expected to generate 1.9 times more return on investment than Globe Trade. However, New Tech is 1.9 times more volatile than Globe Trade Centre. It trades about 0.01 of its potential returns per unit of risk. Globe Trade Centre is currently generating about -0.45 per unit of risk. If you would invest  13.00  in New Tech Venture on September 12, 2024 and sell it today you would earn a total of  0.00  from holding New Tech Venture or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

New Tech Venture  vs.  Globe Trade Centre

New Tech Venture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Tech Venture has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Globe Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with New Tech and Globe Trade

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

The idea behind New Tech Venture and Globe Trade Centre 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.