Correlation Between GungHo Online and Highlight Communications

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Can any of the company-specific risk be diversified away by investing in both GungHo Online and Highlight Communications 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 GungHo Online and Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GungHo Online Entertainment and Highlight Communications AG, you can compare the effects of market volatilities on GungHo Online and Highlight Communications 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 GungHo Online with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GungHo Online and Highlight Communications.

Diversification Opportunities for GungHo Online and Highlight Communications

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between GungHo and Highlight is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and GungHo Online 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 GungHo Online Entertainment are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of GungHo Online i.e., GungHo Online and Highlight Communications go up and down completely randomly.

Pair Corralation between GungHo Online and Highlight Communications

Assuming the 90 days horizon GungHo Online Entertainment is expected to under-perform the Highlight Communications. But the stock apears to be less risky and, when comparing its historical volatility, GungHo Online Entertainment is 2.69 times less risky than Highlight Communications. The stock trades about -0.08 of its potential returns per unit of risk. The Highlight Communications AG is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  114.00  in Highlight Communications AG on October 29, 2024 and sell it today you would earn a total of  35.00  from holding Highlight Communications AG or generate 30.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

GungHo Online Entertainment  vs.  Highlight Communications AG

 Performance 
       Timeline  
GungHo Online Entert 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GungHo Online Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
Highlight Communications 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

GungHo Online and Highlight Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GungHo Online and Highlight Communications

The main advantage of trading using opposite GungHo Online and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GungHo Online position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.
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The idea behind GungHo Online Entertainment and Highlight Communications AG 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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