Correlation Between Gome Telecom and Allgens Medical

Can any of the company-specific risk be diversified away by investing in both Gome Telecom and Allgens Medical 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 Allgens Medical 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 Allgens Medical Technology, you can compare the effects of market volatilities on Gome Telecom and Allgens Medical 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 Allgens Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and Allgens Medical.

Diversification Opportunities for Gome Telecom and Allgens Medical

0.44

Correlation Coefficient

Gome Telecom  Allgens Medical

Very weak diversification

The 3 months correlation between Gome and Allgens is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Allgens Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allgens Medical Tech 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 Allgens Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allgens Medical Tech has no effect on the direction of Gome Telecom i.e., Gome Telecom and Allgens Medical go up and down completely randomly.

Pair Corralation between Gome Telecom and Allgens Medical

Assuming the 90 days trading horizon Gome Telecom Equipment is expected to under-perform the Allgens Medical. In addition to that, Gome Telecom is 1.07 times more volatile than Allgens Medical Technology. It trades about -0.04 of its total potential returns per unit of risk. Allgens Medical Technology is currently generating about -0.01 per unit of volatility. If you would invest  2,260  in Allgens Medical Technology on September 12, 2024 and sell it today you would lose (467.00) from holding Allgens Medical Technology or give up 20.66% of portfolio value over 90 days.

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

Gome Telecom Equipment  vs.  Allgens Medical Technology

Gome Telecom Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gome Telecom Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gome Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allgens Medical Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allgens Medical Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allgens Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and Allgens Medical

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

The idea behind Gome Telecom Equipment and Allgens Medical Technology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.