Correlation Between Pinterest and GMO Internet

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

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

Diversification Opportunities for Pinterest and GMO Internet

0.16

Correlation Coefficient

Pinterest  GMO Internet

Average diversification

The 3 months correlation between Pinterest and GMO is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Pinterest 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 Pinterest are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Pinterest i.e., Pinterest and GMO Internet go up and down completely randomly.

Pair Corralation between Pinterest and GMO Internet

Given the investment horizon of 90 days Pinterest is expected to generate 2.26 times less return on investment than GMO Internet. In addition to that, Pinterest is 1.77 times more volatile than GMO Internet. It trades about 0.05 of its total potential returns per unit of risk. GMO Internet is currently generating about 0.2 per unit of volatility. If you would invest  1,741  in GMO Internet on December 20, 2024 and sell it today you would earn a total of  444.00  from holding GMO Internet or generate 25.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pinterest  vs.  GMO Internet

Pinterest

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pinterest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pinterest and GMO Internet

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

The idea behind Pinterest and GMO Internet 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.