Correlation Between Grom Social and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Grom Social and CEA Industries 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 Grom Social and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grom Social Enterprises and CEA Industries, you can compare the effects of market volatilities on Grom Social and CEA Industries 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 Grom Social with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grom Social and CEA Industries.
Diversification Opportunities for Grom Social and CEA Industries
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Grom and CEA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Grom Social Enterprises and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Grom Social 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 Grom Social Enterprises are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Grom Social i.e., Grom Social and CEA Industries go up and down completely randomly.
Pair Corralation between Grom Social and CEA Industries
If you would invest 1.00 in Grom Social Enterprises on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Grom Social Enterprises or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Grom Social Enterprises vs. CEA Industries
Performance |
| Timeline |
| Grom Social Enterprises |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CEA Industries |
Grom Social and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grom Social and CEA Industries
The main advantage of trading using opposite Grom Social and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grom Social position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.The idea behind Grom Social Enterprises and CEA Industries 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.| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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