Correlation Between Gnosis and Core

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

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

Diversification Opportunities for Gnosis and Core

0.31

Correlation Coefficient

Gnosis  Core

Weak diversification

The 3 months correlation between Gnosis and Core is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gnosis and Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core and Gnosis 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 Gnosis are associated (or correlated) with Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core has no effect on the direction of Gnosis i.e., Gnosis and Core go up and down completely randomly.

Pair Corralation between Gnosis and Core

Assuming the 90 days trading horizon Gnosis is expected to generate 1.44 times less return on investment than Core. But when comparing it to its historical volatility, Gnosis is 1.88 times less risky than Core. It trades about 0.25 of its potential returns per unit of risk. Core is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  87.00  in Core on September 2, 2024 and sell it today you would earn a total of  110.00  from holding Core or generate 126.44% return on investment over 90 days.

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

Gnosis  vs.  Core

Gnosis

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gnosis are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gnosis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Core

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Core are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Core exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gnosis and Core

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

The idea behind Gnosis and Core 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.