Correlation Between GBS Software and Aluminum
Can any of the company-specific risk be diversified away by investing in both GBS Software and Aluminum 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 GBS Software and Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GBS Software AG and Aluminum of, you can compare the effects of market volatilities on GBS Software and Aluminum 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 GBS Software with a short position of Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and Aluminum.
Diversification Opportunities for GBS Software and Aluminum
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GBS and Aluminum is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum and GBS Software 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 GBS Software AG are associated (or correlated) with Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of GBS Software i.e., GBS Software and Aluminum go up and down completely randomly.
Pair Corralation between GBS Software and Aluminum
Assuming the 90 days trading horizon GBS Software is expected to generate 5.19 times less return on investment than Aluminum. But when comparing it to its historical volatility, GBS Software AG is 1.37 times less risky than Aluminum. It trades about 0.02 of its potential returns per unit of risk. Aluminum of is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Aluminum of on November 2, 2024 and sell it today you would earn a total of 13.00 from holding Aluminum of or generate 27.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GBS Software AG vs. Aluminum of
Performance |
| Timeline |
| GBS Software AG |
| Aluminum |
GBS Software and Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GBS Software and Aluminum
The main advantage of trading using opposite GBS Software and Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GBS Software position performs unexpectedly, Aluminum 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 Aluminum will offset losses from the drop in Aluminum's long position.| GBS Software vs. TITAN MACHINERY | GBS Software vs. Lamar Advertising | GBS Software vs. GungHo Online Entertainment | GBS Software vs. North American Construction |
| Aluminum vs. Strategic Education | Aluminum vs. NH HOTEL GROUP | Aluminum vs. Choice Hotels International | Aluminum vs. TAL Education Group |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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