Correlation Between Frontdoor and GD Entertainment

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

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

Diversification Opportunities for Frontdoor and GD Entertainment

0.28

Correlation Coefficient

Frontdoor  GD Entertainment

Modest diversification

The 3 months correlation between Frontdoor and GDET is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Frontdoor and GD Entertainment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GD Entertainment Tec and Frontdoor 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 Frontdoor are associated (or correlated) with GD Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GD Entertainment Tec has no effect on the direction of Frontdoor i.e., Frontdoor and GD Entertainment go up and down completely randomly.

Pair Corralation between Frontdoor and GD Entertainment

Given the investment horizon of 90 days Frontdoor is expected to generate 374.0 times less return on investment than GD Entertainment. But when comparing it to its historical volatility, Frontdoor is 196.97 times less risky than GD Entertainment. It trades about 0.19 of its potential returns per unit of risk. GD Entertainment Technology is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  0.01  in GD Entertainment Technology on September 3, 2024 and sell it today you would earn a total of  0.00  from holding GD Entertainment Technology or generate 0.0% return on investment over 90 days.

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

Frontdoor  vs.  GD Entertainment Technology

Frontdoor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Frontdoor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Frontdoor reported solid returns over the last few months and may actually be approaching a breakup point.

GD Entertainment Tec

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GD Entertainment Technology are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, GD Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frontdoor and GD Entertainment

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

The idea behind Frontdoor and GD Entertainment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.