Correlation Between Globalfoundries and 191216DJ6

Can any of the company-specific risk be diversified away by investing in both Globalfoundries and 191216DJ6 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 Globalfoundries and 191216DJ6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Globalfoundries and COCA COLA CO, you can compare the effects of market volatilities on Globalfoundries and 191216DJ6 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 Globalfoundries with a short position of 191216DJ6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globalfoundries and 191216DJ6.

Diversification Opportunities for Globalfoundries and 191216DJ6

-0.28

Correlation Coefficient

Globalfoundries  191216DJ6

Very good diversification

The 3 months correlation between Globalfoundries and 191216DJ6 is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO and Globalfoundries 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 Globalfoundries are associated (or correlated) with 191216DJ6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Globalfoundries i.e., Globalfoundries and 191216DJ6 go up and down completely randomly.

Pair Corralation between Globalfoundries and 191216DJ6

Considering the 90-day investment horizon Globalfoundries is expected to generate 7.58 times more return on investment than 191216DJ6. However, Globalfoundries is 7.58 times more volatile than COCA COLA CO. It trades about 0.07 of its potential returns per unit of risk. COCA COLA CO is currently generating about -0.19 per unit of risk. If you would invest  3,927  in Globalfoundries on September 25, 2024 and sell it today you would earn a total of  476.00  from holding Globalfoundries or generate 12.12% return on investment over 90 days.

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

Globalfoundries  vs.  COCA COLA CO

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DJ6 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Globalfoundries and 191216DJ6

The main advantage of trading using opposite Globalfoundries and 191216DJ6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries position performs unexpectedly, 191216DJ6 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 191216DJ6 will offset losses from the drop in 191216DJ6's long position.

The idea behind Globalfoundries and COCA COLA CO 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.