Correlation Between Phoenix New and Gaia

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

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

Diversification Opportunities for Phoenix New and Gaia

0.69

Correlation Coefficient

Phoenix New  Gaia

Poor diversification

The 3 months correlation between Phoenix and Gaia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc and Phoenix New 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 Phoenix New Media are associated (or correlated) with Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of Phoenix New i.e., Phoenix New and Gaia go up and down completely randomly.

Pair Corralation between Phoenix New and Gaia

Given the investment horizon of 90 days Phoenix New is expected to generate 6.75 times less return on investment than Gaia. In addition to that, Phoenix New is 1.2 times more volatile than Gaia Inc. It trades about 0.0 of its total potential returns per unit of risk. Gaia Inc is currently generating about 0.01 per unit of volatility. If you would invest  500.00  in Gaia Inc on January 20, 2024 and sell it today you would lose (107.00) from holding Gaia Inc or give up 21.4% of portfolio value over 90 days.

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

Phoenix New Media  vs.  Gaia Inc

Phoenix New Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix New Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Phoenix New reported solid returns over the last few months and may actually be approaching a breakup point.

Gaia Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Gaia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix New and Gaia

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

The idea behind Phoenix New Media and Gaia Inc 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.