Correlation Between New Residential and GBS Software
Can any of the company-specific risk be diversified away by investing in both New Residential and GBS Software 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 New Residential and GBS Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and GBS Software AG, you can compare the effects of market volatilities on New Residential and GBS Software 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 New Residential with a short position of GBS Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and GBS Software.
Diversification Opportunities for New Residential and GBS Software
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and GBS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software AG and New Residential 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 New Residential Investment are associated (or correlated) with GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of New Residential i.e., New Residential and GBS Software go up and down completely randomly.
Pair Corralation between New Residential and GBS Software
Assuming the 90 days trading horizon New Residential is expected to generate 3.22 times less return on investment than GBS Software. But when comparing it to its historical volatility, New Residential Investment is 2.05 times less risky than GBS Software. It trades about 0.12 of its potential returns per unit of risk. GBS Software AG is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 260.00 in GBS Software AG on October 30, 2024 and sell it today you would earn a total of 42.00 from holding GBS Software AG or generate 16.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. GBS Software AG
Performance |
| Timeline |
| New Residential Inve |
| GBS Software AG |
New Residential and GBS Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and GBS Software
The main advantage of trading using opposite New Residential and GBS Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, GBS Software 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 GBS Software will offset losses from the drop in GBS Software's long position.| New Residential vs. Sunny Optical Technology | New Residential vs. SEKISUI CHEMICAL | New Residential vs. TIANDE CHEMICAL | New Residential vs. Casio Computer CoLtd |
| GBS Software vs. EVS Broadcast Equipment | GBS Software vs. Elmos Semiconductor SE | GBS Software vs. Nordic Semiconductor ASA | GBS Software vs. Transport International Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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