Correlation Between G III and Computershare

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

By analyzing existing cross correlation between G III Apparel Group and Computershare Limited, you can compare the effects of market volatilities on G III and Computershare 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 G III with a short position of Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of G III and Computershare.

Diversification Opportunities for G III and Computershare

0.08

Correlation Coefficient

G III  Computershare

Significant diversification

The 3 months correlation between GI4 and Computershare is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited and G III 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 G III Apparel Group are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of G III i.e., G III and Computershare go up and down completely randomly.

Pair Corralation between G III and Computershare

Assuming the 90 days trading horizon G III Apparel Group is expected to generate 2.26 times more return on investment than Computershare. However, G III is 2.26 times more volatile than Computershare Limited. It trades about 0.08 of its potential returns per unit of risk. Computershare Limited is currently generating about 0.13 per unit of risk. If you would invest  2,380  in G III Apparel Group on September 3, 2024 and sell it today you would earn a total of  420.00  from holding G III Apparel Group or generate 17.65% return on investment over 90 days.

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

G III Apparel Group  vs.  Computershare Limited

G III Apparel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, G III unveiled solid returns over the last few months and may actually be approaching a breakup point.

Computershare Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G III and Computershare

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

The idea behind G III Apparel Group and Computershare Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.