Correlation Between River and G5 Entertainment

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

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

Diversification Opportunities for River and G5 Entertainment

0.61

Correlation Coefficient

River  G5 Entertainment

Poor diversification

The 3 months correlation between River and 0QUS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and G5 Entertainment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G5 Entertainment and River 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 River and Mercantile 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 has no effect on the direction of River i.e., River and G5 Entertainment go up and down completely randomly.

Pair Corralation between River and G5 Entertainment

Assuming the 90 days trading horizon River is expected to generate 7.65 times less return on investment than G5 Entertainment. But when comparing it to its historical volatility, River and Mercantile is 2.83 times less risky than G5 Entertainment. It trades about 0.07 of its potential returns per unit of risk. G5 Entertainment AB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,080  in G5 Entertainment AB on October 6, 2024 and sell it today you would earn a total of  2,720  from holding G5 Entertainment AB or generate 29.96% return on investment over 90 days.

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

River and Mercantile  vs.  G5 Entertainment AB

River and Mercantile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

G5 Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in G5 Entertainment AB are ranked lower than 15 (%) 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 River and G5 Entertainment

The main advantage of trading using opposite River and G5 Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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 River and Mercantile and G5 Entertainment AB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.