Correlation Between Apple and GBS Software

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

By analyzing existing cross correlation between Apple Inc and GBS Software AG, you can compare the effects of market volatilities on Apple 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 Apple with a short position of GBS Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and GBS Software.

Diversification Opportunities for Apple and GBS Software

0.25

Correlation Coefficient

Apple  GBS Software

Modest diversification

The 3 months correlation between Apple and GBS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and GBS Software go up and down completely randomly.

Pair Corralation between Apple and GBS Software

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.38 times more return on investment than GBS Software. However, Apple Inc is 2.67 times less risky than GBS Software. It trades about 0.23 of its potential returns per unit of risk. GBS Software AG is currently generating about 0.06 per unit of risk. If you would invest  20,491  in Apple Inc on October 8, 2024 and sell it today you would earn a total of  3,214  from holding Apple Inc or generate 15.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  GBS Software AG

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

GBS Software AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GBS Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apple and GBS Software

The main advantage of trading using opposite Apple and GBS Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.

The idea behind Apple Inc and GBS Software AG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.