Correlation Between Data Communications and Galway Metals

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

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

Diversification Opportunities for Data Communications and Galway Metals

0.42

Correlation Coefficient

Data Communications  Galway Metals

Very weak diversification

The 3 months correlation between Data and Galway is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Galway Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galway Metals and Data Communications 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 Data Communications Management are associated (or correlated) with Galway Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galway Metals has no effect on the direction of Data Communications i.e., Data Communications and Galway Metals go up and down completely randomly.

Pair Corralation between Data Communications and Galway Metals

Assuming the 90 days trading horizon Data Communications Management is expected to generate 0.85 times more return on investment than Galway Metals. However, Data Communications Management is 1.18 times less risky than Galway Metals. It trades about -0.19 of its potential returns per unit of risk. Galway Metals is currently generating about -0.19 per unit of risk. If you would invest  179.00  in Data Communications Management on April 24, 2025 and sell it today you would lose (15.00) from holding Data Communications Management or give up 8.38% of portfolio value over 90 days.

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

Data Communications Management  vs.  Galway Metals

Data Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Communications is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Galway Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galway Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Galway Metals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Data Communications and Galway Metals

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

The idea behind Data Communications Management and Galway Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.