Correlation Between GCM Grosvenor and Focus Graphite

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

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

Diversification Opportunities for GCM Grosvenor and Focus Graphite

-0.62

Correlation Coefficient

GCM Grosvenor  Focus Graphite

Excellent diversification

The 3 months correlation between GCM and Focus is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding GCM Grosvenor and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and GCM Grosvenor 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 GCM Grosvenor are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of GCM Grosvenor i.e., GCM Grosvenor and Focus Graphite go up and down completely randomly.

Pair Corralation between GCM Grosvenor and Focus Graphite

Assuming the 90 days horizon GCM Grosvenor is expected to generate 0.93 times more return on investment than Focus Graphite. However, GCM Grosvenor is 1.08 times less risky than Focus Graphite. It trades about 0.15 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.07 per unit of risk. If you would invest  77.00  in GCM Grosvenor on August 31, 2024 and sell it today you would earn a total of  49.00  from holding GCM Grosvenor or generate 63.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

GCM Grosvenor  vs.  Focus Graphite

GCM Grosvenor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GCM Grosvenor and Focus Graphite

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

The idea behind GCM Grosvenor and Focus Graphite 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.