Correlation Between Gamma Communications and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and Auto Trader 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 Gamma Communications and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Auto Trader Group, you can compare the effects of market volatilities on Gamma Communications and Auto Trader 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 Gamma Communications with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Auto Trader.
Diversification Opportunities for Gamma Communications and Auto Trader
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gamma and Auto is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Gamma Communications i.e., Gamma Communications and Auto Trader go up and down completely randomly.
Pair Corralation between Gamma Communications and Auto Trader
Assuming the 90 days trading horizon Gamma Communications PLC is expected to under-perform the Auto Trader. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications PLC is 1.79 times less risky than Auto Trader. The stock trades about -0.08 of its potential returns per unit of risk. The Auto Trader Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 84,420 in Auto Trader Group on September 2, 2024 and sell it today you would lose (520.00) from holding Auto Trader Group or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. Auto Trader Group
Performance |
| Timeline |
| Gamma Communications PLC |
| Auto Trader Group |
Gamma Communications and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Auto Trader
The main advantage of trading using opposite Gamma Communications and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Gamma Communications vs. Samsung Electronics Co | Gamma Communications vs. Samsung Electronics Co | Gamma Communications vs. Hyundai Motor | Gamma Communications vs. Toyota Motor Corp |
| Auto Trader vs. Catalyst Media Group | Auto Trader vs. Tamburi Investment Partners | Auto Trader vs. Magnora ASA | Auto Trader vs. RTW Venture Fund |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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