Correlation Between GAIA and DENT

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

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

Diversification Opportunities for GAIA and DENT

0.17

Correlation Coefficient

GAIA  DENT

Average diversification

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

Pair Corralation between GAIA and DENT

Assuming the 90 days trading horizon GAIA is expected to generate 52.84 times more return on investment than DENT. However, GAIA is 52.84 times more volatile than DENT. It trades about 0.21 of its potential returns per unit of risk. DENT is currently generating about -0.09 per unit of risk. If you would invest  0.00  in GAIA on February 15, 2024 and sell it today you would earn a total of  0.54  from holding GAIA or generate 9.223372036854776E16% return on investment over 90 days.

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

GAIA  vs.  DENT

GAIA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAIA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GAIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

DENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, DENT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GAIA and DENT

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

The idea behind GAIA and DENT 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.