Correlation Between Gome Telecom and Uroica Mining

Can any of the company-specific risk be diversified away by investing in both Gome Telecom and Uroica Mining 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 Gome Telecom and Uroica Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gome Telecom Equipment and Uroica Mining Safety, you can compare the effects of market volatilities on Gome Telecom and Uroica Mining 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 Gome Telecom with a short position of Uroica Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and Uroica Mining.

Diversification Opportunities for Gome Telecom and Uroica Mining

0.59

Correlation Coefficient

Gome Telecom  Uroica Mining

Very weak diversification

The 3 months correlation between Gome and Uroica is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Uroica Mining Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uroica Mining Safety and Gome Telecom 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 Gome Telecom Equipment are associated (or correlated) with Uroica Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uroica Mining Safety has no effect on the direction of Gome Telecom i.e., Gome Telecom and Uroica Mining go up and down completely randomly.

Pair Corralation between Gome Telecom and Uroica Mining

Assuming the 90 days trading horizon Gome Telecom is expected to generate 1.61 times less return on investment than Uroica Mining. But when comparing it to its historical volatility, Gome Telecom Equipment is 1.13 times less risky than Uroica Mining. It trades about 0.13 of its potential returns per unit of risk. Uroica Mining Safety is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Uroica Mining Safety on September 2, 2024 and sell it today you would earn a total of  237.00  from holding Uroica Mining Safety or generate 51.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gome Telecom Equipment  vs.  Uroica Mining Safety

Gome Telecom Equipment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gome Telecom Equipment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gome Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Uroica Mining Safety

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Uroica Mining Safety are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Uroica Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and Uroica Mining

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

The idea behind Gome Telecom Equipment and Uroica Mining Safety 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.