Correlation Between Globe Trade and New Tech

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

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

Diversification Opportunities for Globe Trade and New Tech

-0.34

Correlation Coefficient

Globe Trade  New Tech

Very good diversification

The 3 months correlation between Globe and New is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre and New Tech Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Capital and Globe Trade 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 Globe Trade Centre are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Capital has no effect on the direction of Globe Trade i.e., Globe Trade and New Tech go up and down completely randomly.

Pair Corralation between Globe Trade and New Tech

Assuming the 90 days trading horizon Globe Trade Centre is expected to under-perform the New Tech. But the stock apears to be less risky and, when comparing its historical volatility, Globe Trade Centre is 1.81 times less risky than New Tech. The stock trades about -0.02 of its potential returns per unit of risk. The New Tech Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  63.00  in New Tech Capital on September 14, 2024 and sell it today you would earn a total of  15.00  from holding New Tech Capital or generate 23.81% return on investment over 90 days.

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

Globe Trade Centre  vs.  New Tech Capital

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Globe Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

New Tech Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Tech Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Globe Trade and New Tech

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

The idea behind Globe Trade Centre and New Tech Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.