Correlation Between Shopify and Gannett

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

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

Diversification Opportunities for Shopify and Gannett

-0.02

Correlation Coefficient

Shopify  Gannett

Good diversification

The 3 months correlation between Shopify and Gannett is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Gannett Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gannett and Shopify 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 Shopify are associated (or correlated) with Gannett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gannett has no effect on the direction of Shopify i.e., Shopify and Gannett go up and down completely randomly.

Pair Corralation between Shopify and Gannett

Given the investment horizon of 90 days Shopify is expected to under-perform the Gannett. But the stock apears to be less risky and, when comparing its historical volatility, Shopify is 1.75 times less risky than Gannett. The stock trades about -0.2 of its potential returns per unit of risk. The Gannett Co is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Gannett Co on January 26, 2024 and sell it today you would earn a total of  47.00  from holding Gannett Co or generate 21.17% return on investment over 90 days.

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

Shopify  vs.  Gannett Co

Shopify

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Gannett

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gannett Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Gannett may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Shopify and Gannett

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

The idea behind Shopify and Gannett Co 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.