Correlation Between Tamburi Investment and GSE Systems

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

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

Diversification Opportunities for Tamburi Investment and GSE Systems

-0.65

Correlation Coefficient

Tamburi Investment  GSE Systems

Excellent diversification

The 3 months correlation between Tamburi and GSE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tamburi Investment Partners and GSE Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSE Systems and Tamburi Investment 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 Tamburi Investment Partners are associated (or correlated) with GSE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSE Systems has no effect on the direction of Tamburi Investment i.e., Tamburi Investment and GSE Systems go up and down completely randomly.

Pair Corralation between Tamburi Investment and GSE Systems

Assuming the 90 days trading horizon Tamburi Investment Partners is expected to under-perform the GSE Systems. But the stock apears to be less risky and, when comparing its historical volatility, Tamburi Investment Partners is 1.6 times less risky than GSE Systems. The stock trades about -0.11 of its potential returns per unit of risk. The GSE Systems is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  401.00  in GSE Systems on September 12, 2024 and sell it today you would earn a total of  58.00  from holding GSE Systems or generate 14.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	57.81%
Values	Daily Returns

Tamburi Investment Partners  vs.  GSE Systems

Tamburi Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tamburi Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GSE Systems

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days GSE Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile basic indicators, GSE Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tamburi Investment and GSE Systems

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

The idea behind Tamburi Investment Partners and GSE Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.