Correlation Between Promise Technology and Gigastorage Corp
Can any of the company-specific risk be diversified away by investing in both Promise Technology and Gigastorage Corp 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 Promise Technology and Gigastorage Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promise Technology and Gigastorage Corp, you can compare the effects of market volatilities on Promise Technology and Gigastorage Corp 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 Promise Technology with a short position of Gigastorage Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promise Technology and Gigastorage Corp.
Diversification Opportunities for Promise Technology and Gigastorage Corp
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Promise and Gigastorage is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Promise Technology and Gigastorage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gigastorage Corp and Promise Technology 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 Promise Technology are associated (or correlated) with Gigastorage Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gigastorage Corp has no effect on the direction of Promise Technology i.e., Promise Technology and Gigastorage Corp go up and down completely randomly.
Pair Corralation between Promise Technology and Gigastorage Corp
Assuming the 90 days trading horizon Promise Technology is expected to under-perform the Gigastorage Corp. But the stock apears to be less risky and, when comparing its historical volatility, Promise Technology is 1.64 times less risky than Gigastorage Corp. The stock trades about -0.36 of its potential returns per unit of risk. The Gigastorage Corp is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 1,835 in Gigastorage Corp on September 1, 2024 and sell it today you would lose (155.00) from holding Gigastorage Corp or give up 8.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Promise Technology vs. Gigastorage Corp
Performance |
| Timeline |
| Promise Technology |
| Gigastorage Corp |
Promise Technology and Gigastorage Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promise Technology and Gigastorage Corp
The main advantage of trading using opposite Promise Technology and Gigastorage Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promise Technology position performs unexpectedly, Gigastorage Corp 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 Gigastorage Corp will offset losses from the drop in Gigastorage Corp's long position.The idea behind Promise Technology and Gigastorage Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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