Correlation Between GDEV and The9
Can any of the company-specific risk be diversified away by investing in both GDEV and The9 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 GDEV and The9 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GDEV Inc and The9 Ltd ADR, you can compare the effects of market volatilities on GDEV and The9 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 GDEV with a short position of The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of GDEV and The9.
Diversification Opportunities for GDEV and The9
Very good diversification
The 3 months correlation between GDEV and The9 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding GDEV Inc and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR and GDEV 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 GDEV Inc are associated (or correlated) with The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of GDEV i.e., GDEV and The9 go up and down completely randomly.
Pair Corralation between GDEV and The9
Given the investment horizon of 90 days GDEV Inc is expected to under-perform the The9. But the stock apears to be less risky and, when comparing its historical volatility, GDEV Inc is 1.12 times less risky than The9. The stock trades about -0.02 of its potential returns per unit of risk. The The9 Ltd ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 809.00 in The9 Ltd ADR on September 12, 2024 and sell it today you would earn a total of 955.00 from holding The9 Ltd ADR or generate 118.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GDEV Inc vs. The9 Ltd ADR
Performance |
| Timeline |
| GDEV Inc |
| The9 Ltd ADR |
GDEV and The9 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GDEV and The9
The main advantage of trading using opposite GDEV and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GDEV position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.The idea behind GDEV Inc and The9 Ltd ADR 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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