Correlation Between SC and GMX

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

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

Diversification Opportunities for SC and GMX

0.89

Correlation Coefficient

SC  GMX

Very poor diversification

The 3 months correlation between SC and GMX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SC and GMX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMX and SC 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 SC are associated (or correlated) with GMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMX has no effect on the direction of SC i.e., SC and GMX go up and down completely randomly.

Pair Corralation between SC and GMX

Assuming the 90 days horizon SC is expected to generate 0.62 times more return on investment than GMX. However, SC is 1.62 times less risky than GMX. It trades about -0.19 of its potential returns per unit of risk. GMX is currently generating about -0.15 per unit of risk. If you would invest  0.58  in SC on December 27, 2024 and sell it today you would lose (0.24) from holding SC or give up 40.52% of portfolio value over 90 days.

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

SC  vs.  GMX

SC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for SC shareholders.

GMX

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for GMX shareholders.

Pair Trading with SC and GMX

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

The idea behind SC and GMX 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.