Correlation Between GBS Software and LG Electronics
Can any of the company-specific risk be diversified away by investing in both GBS Software and LG Electronics 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 LG Electronics 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 LG Electronics, you can compare the effects of market volatilities on GBS Software and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and LG Electronics.
Diversification Opportunities for GBS Software and LG Electronics
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GBS and LGLG is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of GBS Software i.e., GBS Software and LG Electronics go up and down completely randomly.
Pair Corralation between GBS Software and LG Electronics
Assuming the 90 days trading horizon GBS Software AG is expected to generate 1.03 times more return on investment than LG Electronics. However, GBS Software is 1.03 times more volatile than LG Electronics. It trades about 0.04 of its potential returns per unit of risk. LG Electronics is currently generating about 0.0 per unit of risk. If you would invest 214.00 in GBS Software AG on October 11, 2024 and sell it today you would earn a total of 90.00 from holding GBS Software AG or generate 42.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GBS Software AG vs. LG Electronics
Performance |
| Timeline |
| GBS Software AG |
| LG Electronics |
GBS Software and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GBS Software and LG Electronics
The main advantage of trading using opposite GBS Software and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GBS Software position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| GBS Software vs. QURATE RETAIL INC | GBS Software vs. Costco Wholesale Corp | GBS Software vs. BJs Restaurants | GBS Software vs. Burlington Stores |
| LG Electronics vs. USU Software AG | LG Electronics vs. FORMPIPE SOFTWARE AB | LG Electronics vs. INTERSHOP Communications Aktiengesellschaft | LG Electronics vs. GBS Software AG |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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