Correlation Between Sui and GFT
Can any of the company-specific risk be diversified away by investing in both Sui and GFT 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 Sui and GFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sui and GFT, you can compare the effects of market volatilities on Sui and GFT 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 Sui with a short position of GFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sui and GFT.
Diversification Opportunities for Sui and GFT
Excellent diversification
The 3 months correlation between Sui and GFT is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sui and GFT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFT and Sui 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 Sui are associated (or correlated) with GFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFT has no effect on the direction of Sui i.e., Sui and GFT go up and down completely randomly.
Pair Corralation between Sui and GFT
Assuming the 90 days trading horizon Sui is expected to generate 0.87 times more return on investment than GFT. However, Sui is 1.15 times less risky than GFT. It trades about 0.16 of its potential returns per unit of risk. GFT is currently generating about 0.02 per unit of risk. If you would invest 106.00 in Sui on August 27, 2024 and sell it today you would earn a total of 238.00 from holding Sui or generate 224.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sui vs. GFT
Performance |
| Timeline |
| Sui |
| GFT |
Sui and GFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sui and GFT
The main advantage of trading using opposite Sui and GFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sui position performs unexpectedly, GFT 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 GFT will offset losses from the drop in GFT's long position.The idea behind Sui and GFT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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