Correlation Between GSI Technology and NVE

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

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

Diversification Opportunities for GSI Technology and NVE

0.58

Correlation Coefficient

GSI Technology  NVE

Very weak diversification

The 3 months correlation between GSI and NVE is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GSI Technology and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation and GSI Technology 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 GSI Technology are associated (or correlated) with NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of GSI Technology i.e., GSI Technology and NVE go up and down completely randomly.

Pair Corralation between GSI Technology and NVE

Given the investment horizon of 90 days GSI Technology is expected to under-perform the NVE. In addition to that, GSI Technology is 3.79 times more volatile than NVE Corporation. It trades about -0.08 of its total potential returns per unit of risk. NVE Corporation is currently generating about -0.3 per unit of volatility. If you would invest  8,701  in NVE Corporation on February 2, 2024 and sell it today you would lose (1,002) from holding NVE Corporation or give up 11.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

GSI Technology  vs.  NVE Corp.

GSI Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GSI Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, GSI Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

NVE Corporation

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with GSI Technology and NVE

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

The idea behind GSI Technology and NVE Corporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.