Correlation Between GD Entertainment and Compania Cervecerias

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

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

Diversification Opportunities for GD Entertainment and Compania Cervecerias

-0.17

Correlation Coefficient

GD Entertainment  Compania Cervecerias

Good diversification

The 3 months correlation between GDET and Compania is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding GD Entertainment Technology and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and GD Entertainment 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 GD Entertainment Technology are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of GD Entertainment i.e., GD Entertainment and Compania Cervecerias go up and down completely randomly.

Pair Corralation between GD Entertainment and Compania Cervecerias

Given the investment horizon of 90 days GD Entertainment Technology is expected to generate 210.17 times more return on investment than Compania Cervecerias. However, GD Entertainment is 210.17 times more volatile than Compania Cervecerias Unidas. It trades about 0.36 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.12 per unit of risk. If you would invest  0.01  in GD Entertainment Technology on September 12, 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 Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

GD Entertainment Technology  vs.  Compania Cervecerias Unidas

GD Entertainment Tec

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GD Entertainment Technology are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, GD Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Compania Cervecerias

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GD Entertainment and Compania Cervecerias

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

The idea behind GD Entertainment Technology and Compania Cervecerias Unidas 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.