Correlation Between ARDR and Gnosis

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

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

Diversification Opportunities for ARDR and Gnosis

0.78

Correlation Coefficient

ARDR  Gnosis

Poor diversification

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

Pair Corralation between ARDR and Gnosis

Assuming the 90 days trading horizon ARDR is expected to generate 2.07 times more return on investment than Gnosis. However, ARDR is 2.07 times more volatile than Gnosis. It trades about 0.15 of its potential returns per unit of risk. Gnosis is currently generating about 0.26 per unit of risk. If you would invest  6.21  in ARDR on September 1, 2024 and sell it today you would earn a total of  5.79  from holding ARDR or generate 93.24% return on investment over 90 days.

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

ARDR  vs.  Gnosis

ARDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ARDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gnosis

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gnosis are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gnosis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARDR and Gnosis

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

The idea behind ARDR and Gnosis 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.