Correlation Between Acacia Research and GEE

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

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

Diversification Opportunities for Acacia Research and GEE

-0.62

Correlation Coefficient

Acacia Research  GEE

Excellent diversification

The 3 months correlation between Acacia and GEE is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Acacia Research and GEE Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEE Group and Acacia Research 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 Acacia Research are associated (or correlated) with GEE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEE Group has no effect on the direction of Acacia Research i.e., Acacia Research and GEE go up and down completely randomly.

Pair Corralation between Acacia Research and GEE

Given the investment horizon of 90 days Acacia Research is expected to generate 0.94 times more return on investment than GEE. However, Acacia Research is 1.06 times less risky than GEE. It trades about 0.12 of its potential returns per unit of risk. GEE Group is currently generating about -0.14 per unit of risk. If you would invest  353.00  in Acacia Research on January 20, 2024 and sell it today you would earn a total of  131.00  from holding Acacia Research or generate 37.11% return on investment over 90 days.

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

Acacia Research  vs.  GEE Group

Acacia Research

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acacia Research are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Acacia Research reported solid returns over the last few months and may actually be approaching a breakup point.

GEE Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEE Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Acacia Research and GEE

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

The idea behind Acacia Research and GEE Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.