Correlation Between GSC and LRN
Can any of the company-specific risk be diversified away by investing in both GSC and LRN 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 GSC and LRN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSC and LRN, you can compare the effects of market volatilities on GSC and LRN 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 GSC with a short position of LRN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSC and LRN.
Diversification Opportunities for GSC and LRN
Average diversification
The 3 months correlation between GSC and LRN is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding GSC and LRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LRN and GSC 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 GSC are associated (or correlated) with LRN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LRN has no effect on the direction of GSC i.e., GSC and LRN go up and down completely randomly.
Pair Corralation between GSC and LRN
If you would invest 0.23 in LRN on August 23, 2024 and sell it today you would lose (0.03) from holding LRN or give up 13.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
GSC vs. LRN
Performance |
| Timeline |
| GSC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LRN |
GSC and LRN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSC and LRN
The main advantage of trading using opposite GSC and LRN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSC position performs unexpectedly, LRN 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 LRN will offset losses from the drop in LRN's long position.The idea behind GSC and LRN 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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