Correlation Between Satcom Systems and Internet Gold

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

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

Diversification Opportunities for Satcom Systems and Internet Gold

-0.68

Correlation Coefficient

Satcom Systems  Internet Gold

Excellent diversification

The 3 months correlation between Satcom and Internet is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Satcom Systems and Internet Gold Golden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Gold Golden and Satcom Systems 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 Satcom Systems are associated (or correlated) with Internet Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Gold Golden has no effect on the direction of Satcom Systems i.e., Satcom Systems and Internet Gold go up and down completely randomly.

Pair Corralation between Satcom Systems and Internet Gold

Assuming the 90 days trading horizon Satcom Systems is expected to generate 4.04 times less return on investment than Internet Gold. But when comparing it to its historical volatility, Satcom Systems is 10.87 times less risky than Internet Gold. It trades about 0.38 of its potential returns per unit of risk. Internet Gold Golden is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  40,490  in Internet Gold Golden on October 10, 2024 and sell it today you would earn a total of  13,910  from holding Internet Gold Golden or generate 34.35% return on investment over 90 days.

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

Satcom Systems  vs.  Internet Gold Golden

Satcom Systems

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Satcom Systems are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Satcom Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Internet Gold Golden

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Internet Gold Golden are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Internet Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Satcom Systems and Internet Gold

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

The idea behind Satcom Systems and Internet Gold Golden 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.