Correlation Between CU Medical and GS Retail

Can any of the company-specific risk be diversified away by investing in both CU Medical and GS Retail 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 CU Medical and GS Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CU Medical Systems and GS Retail Co, you can compare the effects of market volatilities on CU Medical and GS Retail 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 CU Medical with a short position of GS Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of CU Medical and GS Retail.

Diversification Opportunities for CU Medical and GS Retail

-0.15

Correlation Coefficient

CU Medical  GS Retail

Good diversification

The 3 months correlation between 115480 and 007070 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CU Medical Systems and GS Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Retail and CU Medical 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 CU Medical Systems are associated (or correlated) with GS Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Retail has no effect on the direction of CU Medical i.e., CU Medical and GS Retail go up and down completely randomly.

Pair Corralation between CU Medical and GS Retail

Assuming the 90 days trading horizon CU Medical Systems is expected to under-perform the GS Retail. But the stock apears to be less risky and, when comparing its historical volatility, CU Medical Systems is 1.04 times less risky than GS Retail. The stock trades about -0.12 of its potential returns per unit of risk. The GS Retail Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,210,000  in GS Retail Co on September 3, 2024 and sell it today you would earn a total of  105,000  from holding GS Retail Co or generate 4.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

CU Medical Systems  vs.  GS Retail Co

CU Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CU Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GS Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GS Retail Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GS Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CU Medical and GS Retail

The main advantage of trading using opposite CU Medical and GS Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CU Medical position performs unexpectedly, GS Retail 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 GS Retail will offset losses from the drop in GS Retail's long position.

The idea behind CU Medical Systems and GS Retail Co 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.