Correlation Between Dear Cashmere and Goff Corp

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

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

Diversification Opportunities for Dear Cashmere and Goff Corp

-0.23

Correlation Coefficient

Dear Cashmere  Goff Corp

Very good diversification

The 3 months correlation between Dear and Goff is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding and Goff Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goff Corp and Dear Cashmere 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 Dear Cashmere Holding are associated (or correlated) with Goff Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goff Corp has no effect on the direction of Dear Cashmere i.e., Dear Cashmere and Goff Corp go up and down completely randomly.

Pair Corralation between Dear Cashmere and Goff Corp

Given the investment horizon of 90 days Dear Cashmere is expected to generate 1.0 times less return on investment than Goff Corp. In addition to that, Dear Cashmere is 1.18 times more volatile than Goff Corp. It trades about 0.05 of its total potential returns per unit of risk. Goff Corp is currently generating about 0.06 per unit of volatility. If you would invest  5.12  in Goff Corp on September 3, 2024 and sell it today you would lose (4.25) from holding Goff Corp or give up 83.01% of portfolio value over 90 days.

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

Dear Cashmere Holding  vs.  Goff Corp

Dear Cashmere Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dear Cashmere Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Dear Cashmere reported solid returns over the last few months and may actually be approaching a breakup point.

Goff Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goff Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Goff Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dear Cashmere and Goff Corp

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

The idea behind Dear Cashmere Holding and Goff Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.