Correlation Between Weibo Corp and Golden Grail

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

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

Diversification Opportunities for Weibo Corp and Golden Grail

0.1

Correlation Coefficient

Weibo Corp  Golden Grail

Average diversification

The 3 months correlation between Weibo and Golden is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Golden Grail Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Grail Technology and Weibo Corp 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 Weibo Corp are associated (or correlated) with Golden Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Grail Technology has no effect on the direction of Weibo Corp i.e., Weibo Corp and Golden Grail go up and down completely randomly.

Pair Corralation between Weibo Corp and Golden Grail

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 2.08 times less return on investment than Golden Grail. But when comparing it to its historical volatility, Weibo Corp is 3.54 times less risky than Golden Grail. It trades about 0.16 of its potential returns per unit of risk. Golden Grail Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.72  in Golden Grail Technology on September 13, 2024 and sell it today you would earn a total of  0.59  from holding Golden Grail Technology or generate 21.69% return on investment over 90 days.

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

Weibo Corp  vs.  Golden Grail Technology

Weibo Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Golden Grail Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Grail Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Golden Grail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weibo Corp and Golden Grail

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

The idea behind Weibo Corp and Golden Grail Technology 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.