Correlation Between Rambus and GSI Technology

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

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

Diversification Opportunities for Rambus and GSI Technology

-0.3

Correlation Coefficient

Rambus  GSI Technology

Very good diversification

The 3 months correlation between Rambus and GSI is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rambus Inc and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology and Rambus 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 Rambus Inc are associated (or correlated) with GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of Rambus i.e., Rambus and GSI Technology go up and down completely randomly.

Pair Corralation between Rambus and GSI Technology

Given the investment horizon of 90 days Rambus Inc is expected to generate 0.54 times more return on investment than GSI Technology. However, Rambus Inc is 1.85 times less risky than GSI Technology. It trades about 0.02 of its potential returns per unit of risk. GSI Technology is currently generating about 0.01 per unit of risk. If you would invest  5,869  in Rambus Inc on September 12, 2024 and sell it today you would lose (70.00) from holding Rambus Inc or give up 1.19% of portfolio value over 90 days.

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

Rambus Inc  vs.  GSI Technology

Rambus Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rambus Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Rambus unveiled solid returns over the last few months and may actually be approaching a breakup point.

GSI Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSI Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, GSI Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rambus and GSI Technology

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

The idea behind Rambus Inc and GSI Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.