Correlation Between Globalfoundries and PRECISION

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

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

Diversification Opportunities for Globalfoundries and PRECISION

-0.39

Correlation Coefficient

Globalfoundries  PRECISION

Very good diversification

The 3 months correlation between Globalfoundries and PRECISION is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and PRECISION CASTPARTS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION CASTPARTS and Globalfoundries 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 Globalfoundries are associated (or correlated) with PRECISION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION CASTPARTS has no effect on the direction of Globalfoundries i.e., Globalfoundries and PRECISION go up and down completely randomly.

Pair Corralation between Globalfoundries and PRECISION

Considering the 90-day investment horizon Globalfoundries is expected to under-perform the PRECISION. In addition to that, Globalfoundries is 1.87 times more volatile than PRECISION CASTPARTS P. It trades about -0.03 of its total potential returns per unit of risk. PRECISION CASTPARTS P is currently generating about -0.02 per unit of volatility. If you would invest  8,722  in PRECISION CASTPARTS P on September 13, 2024 and sell it today you would lose (318.00) from holding PRECISION CASTPARTS P or give up 3.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.32%
Values	Daily Returns

Globalfoundries  vs.  PRECISION CASTPARTS P

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

PRECISION CASTPARTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION CASTPARTS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PRECISION CASTPARTS P investors.

Pair Trading with Globalfoundries and PRECISION

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

The idea behind Globalfoundries and PRECISION CASTPARTS P 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.