Correlation Between Redsense Medical and G5 Entertainment

Can any of the company-specific risk be diversified away by investing in both Redsense Medical and G5 Entertainment 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 Redsense Medical and G5 Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Redsense Medical AB and G5 Entertainment publ, you can compare the effects of market volatilities on Redsense Medical and G5 Entertainment 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 Redsense Medical with a short position of G5 Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redsense Medical and G5 Entertainment.

Diversification Opportunities for Redsense Medical and G5 Entertainment

0.02

Correlation Coefficient

Redsense Medical  G5 Entertainment

Significant diversification

The 3 months correlation between Redsense and G5EN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Redsense Medical AB and G5 Entertainment publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G5 Entertainment publ and Redsense Medical 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 Redsense Medical AB are associated (or correlated) with G5 Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G5 Entertainment publ has no effect on the direction of Redsense Medical i.e., Redsense Medical and G5 Entertainment go up and down completely randomly.

Pair Corralation between Redsense Medical and G5 Entertainment

Assuming the 90 days trading horizon Redsense Medical AB is expected to under-perform the G5 Entertainment. In addition to that, Redsense Medical is 1.41 times more volatile than G5 Entertainment publ. It trades about -0.03 of its total potential returns per unit of risk. G5 Entertainment publ is currently generating about 0.09 per unit of volatility. If you would invest  11,000  in G5 Entertainment publ on December 30, 2024 and sell it today you would earn a total of  1,520  from holding G5 Entertainment publ or generate 13.82% return on investment over 90 days.

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

Redsense Medical AB  vs.  G5 Entertainment publ

Redsense Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redsense Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

G5 Entertainment publ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G5 Entertainment publ are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, G5 Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Redsense Medical and G5 Entertainment

The main advantage of trading using opposite Redsense Medical and G5 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redsense Medical position performs unexpectedly, G5 Entertainment 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 G5 Entertainment will offset losses from the drop in G5 Entertainment's long position.

The idea behind Redsense Medical AB and G5 Entertainment publ 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.