Correlation Between Quant and Gnosis

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

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

Diversification Opportunities for Quant and Gnosis

0.67

Correlation Coefficient

Quant  Gnosis

Poor diversification

The 3 months correlation between Quant and Gnosis is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Quant and Gnosis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnosis and Quant 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 Quant are associated (or correlated) with Gnosis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnosis has no effect on the direction of Quant i.e., Quant and Gnosis go up and down completely randomly.

Pair Corralation between Quant and Gnosis

Assuming the 90 days trading horizon Quant is expected to generate 2.72 times less return on investment than Gnosis. In addition to that, Quant is 1.05 times more volatile than Gnosis. It trades about 0.02 of its total potential returns per unit of risk. Gnosis is currently generating about 0.06 per unit of volatility. If you would invest  31,349  in Gnosis on January 20, 2024 and sell it today you would earn a total of  2,789  from holding Gnosis or generate 8.9% return on investment over 90 days.

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

Quant  vs.  Gnosis

Quant

Risk-Adjusted Performance

2 of 100

Weak

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

Gnosis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gnosis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gnosis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quant and Gnosis

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

The idea behind Quant and Gnosis 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.