Correlation Between CA Modas and GSK Plc
Can any of the company-specific risk be diversified away by investing in both CA Modas and GSK Plc 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 CA Modas and GSK Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CA Modas SA and GSK plc, you can compare the effects of market volatilities on CA Modas and GSK Plc 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 CA Modas with a short position of GSK Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of CA Modas and GSK Plc.
Diversification Opportunities for CA Modas and GSK Plc
Excellent diversification
The 3 months correlation between CEAB3 and GSK is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CA Modas SA and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc and CA Modas 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 CA Modas SA are associated (or correlated) with GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of CA Modas i.e., CA Modas and GSK Plc go up and down completely randomly.
Pair Corralation between CA Modas and GSK Plc
Assuming the 90 days trading horizon CA Modas SA is expected to generate 1.89 times more return on investment than GSK Plc. However, CA Modas is 1.89 times more volatile than GSK plc. It trades about 0.04 of its potential returns per unit of risk. GSK plc is currently generating about -0.04 per unit of risk. If you would invest 956.00 in CA Modas SA on September 1, 2024 and sell it today you would earn a total of 101.00 from holding CA Modas SA or generate 10.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
CA Modas SA vs. GSK plc
Performance |
| Timeline |
| CA Modas SA |
| GSK plc |
CA Modas and GSK Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CA Modas and GSK Plc
The main advantage of trading using opposite CA Modas and GSK Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CA Modas position performs unexpectedly, GSK Plc 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 GSK Plc will offset losses from the drop in GSK Plc's long position.The idea behind CA Modas SA and GSK plc 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.| GSK Plc vs. Energisa SA | GSK Plc vs. BTG Pactual Logstica | GSK Plc vs. Plano Plano Desenvolvimento | GSK Plc vs. Companhia Habitasul de |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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