Correlation Between Cipherlab and GeoVision

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

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

Diversification Opportunities for Cipherlab and GeoVision

0.78

Correlation Coefficient

Cipherlab  GeoVision

Poor diversification

The 3 months correlation between Cipherlab and GeoVision is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cipherlab Co and GeoVision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVision and Cipherlab 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 Cipherlab Co are associated (or correlated) with GeoVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVision has no effect on the direction of Cipherlab i.e., Cipherlab and GeoVision go up and down completely randomly.

Pair Corralation between Cipherlab and GeoVision

Assuming the 90 days trading horizon Cipherlab Co is expected to under-perform the GeoVision. But the stock apears to be less risky and, when comparing its historical volatility, Cipherlab Co is 1.36 times less risky than GeoVision. The stock trades about -0.09 of its potential returns per unit of risk. The GeoVision is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,130  in GeoVision on September 21, 2024 and sell it today you would lose (590.00) from holding GeoVision or give up 9.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Cipherlab Co  vs.  GeoVision

Cipherlab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cipherlab Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

GeoVision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GeoVision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Cipherlab and GeoVision

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

The idea behind Cipherlab Co and GeoVision 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.