Correlation Between HHG Capital and GSR II
Can any of the company-specific risk be diversified away by investing in both HHG Capital and GSR II 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 HHG Capital and GSR II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HHG Capital and GSR II Meteora, you can compare the effects of market volatilities on HHG Capital and GSR II 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 HHG Capital with a short position of GSR II. Check out your portfolio center. Please also check ongoing floating volatility patterns of HHG Capital and GSR II.
Diversification Opportunities for HHG Capital and GSR II
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HHG and GSR is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding HHG Capital and GSR II Meteora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSR II Meteora and HHG Capital 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 HHG Capital are associated (or correlated) with GSR II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSR II Meteora has no effect on the direction of HHG Capital i.e., HHG Capital and GSR II go up and down completely randomly.
Pair Corralation between HHG Capital and GSR II
Assuming the 90 days horizon HHG Capital is expected to generate 8.11 times more return on investment than GSR II. However, HHG Capital is 8.11 times more volatile than GSR II Meteora. It trades about 0.18 of its potential returns per unit of risk. GSR II Meteora is currently generating about 0.2 per unit of risk. If you would invest 1.50 in HHG Capital on September 2, 2024 and sell it today you would lose (0.93) from holding HHG Capital or give up 62.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 8.98% |
| Values | Daily Returns |
HHG Capital vs. GSR II Meteora
Performance |
| Timeline |
| HHG Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| GSR II Meteora |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
HHG Capital and GSR II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HHG Capital and GSR II
The main advantage of trading using opposite HHG Capital and GSR II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HHG Capital position performs unexpectedly, GSR II 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 GSR II will offset losses from the drop in GSR II's long position.The idea behind HHG Capital and GSR II Meteora 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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