Correlation Between Tri Pointe and GungHo Online

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

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

Diversification Opportunities for Tri Pointe and GungHo Online

-0.34

Correlation Coefficient

Tri Pointe  GungHo Online

Very good diversification

The 3 months correlation between Tri and GungHo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert and Tri Pointe 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 Tri Pointe Homes are associated (or correlated) with GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of Tri Pointe i.e., Tri Pointe and GungHo Online go up and down completely randomly.

Pair Corralation between Tri Pointe and GungHo Online

Assuming the 90 days horizon Tri Pointe Homes is expected to generate 1.01 times more return on investment than GungHo Online. However, Tri Pointe is 1.01 times more volatile than GungHo Online Entertainment. It trades about 0.07 of its potential returns per unit of risk. GungHo Online Entertainment is currently generating about 0.04 per unit of risk. If you would invest  1,870  in Tri Pointe Homes on September 29, 2024 and sell it today you would earn a total of  1,650  from holding Tri Pointe Homes or generate 88.24% return on investment over 90 days.

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

Tri Pointe Homes  vs.  GungHo Online Entertainment

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GungHo Online Entert

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GungHo Online Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GungHo Online is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tri Pointe and GungHo Online

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

The idea behind Tri Pointe Homes and GungHo Online Entertainment 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.