Correlation Between GBS Software and Microsoft
Can any of the company-specific risk be diversified away by investing in both GBS Software and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on GBS Software and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and Microsoft.
Diversification Opportunities for GBS Software and Microsoft
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GBS and Microsoft is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of GBS Software i.e., GBS Software and Microsoft go up and down completely randomly.
Pair Corralation between GBS Software and Microsoft
Assuming the 90 days trading horizon GBS Software AG is expected to generate 2.25 times more return on investment than Microsoft. However, GBS Software is 2.25 times more volatile than Microsoft. It trades about 0.42 of its potential returns per unit of risk. Microsoft is currently generating about 0.06 per unit of risk. If you would invest 262.00 in GBS Software AG on October 25, 2024 and sell it today you would earn a total of 50.00 from holding GBS Software AG or generate 19.08% 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. Microsoft
Performance |
| Timeline |
| GBS Software AG |
| Microsoft |
GBS Software and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GBS Software and Microsoft
The main advantage of trading using opposite GBS Software and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GBS Software position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| GBS Software vs. Apple Inc | GBS Software vs. Apple Inc | GBS Software vs. Apple Inc | GBS Software vs. Apple Inc |
| Microsoft vs. CAL MAINE FOODS | Microsoft vs. SIEM OFFSHORE NEW | Microsoft vs. PREMIER FOODS | Microsoft vs. PLANT VEDA FOODS |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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