Correlation Between Grom Social and CEA Industries

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

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

Diversification Opportunities for Grom Social and CEA Industries

0.17

Correlation Coefficient

Grom Social  CEA Industries

Average diversification

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

Pair Corralation between Grom Social and CEA Industries

Assuming the 90 days horizon Grom Social Enterprises is expected to generate 34.36 times more return on investment than CEA Industries. However, Grom Social is 34.36 times more volatile than CEA Industries. It trades about 0.15 of its potential returns per unit of risk. CEA Industries is currently generating about 0.04 per unit of risk. If you would invest  201.00  in Grom Social Enterprises on September 4, 2024 and sell it today you would lose (200.00) from holding Grom Social Enterprises or give up 99.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	39.27%
Values	Daily Returns

Grom Social Enterprises  vs.  CEA Industries

Grom Social Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grom Social Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Grom Social is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CEA Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEA Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Grom Social and CEA Industries

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

The idea behind Grom Social Enterprises and CEA Industries 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.