Correlation Between Bank Of and GVS SPA

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

By analyzing existing cross correlation between The Bank of and GVS SPA, you can compare the effects of market volatilities on Bank Of and GVS SPA 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 Bank Of with a short position of GVS SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Of and GVS SPA.

Diversification Opportunities for Bank Of and GVS SPA

-0.3

Correlation Coefficient

Bank Of  GVS SPA

Very good diversification

The 3 months correlation between Bank and GVS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and GVS SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GVS SPA and Bank Of 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 The Bank of are associated (or correlated) with GVS SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GVS SPA has no effect on the direction of Bank Of i.e., Bank Of and GVS SPA go up and down completely randomly.

Pair Corralation between Bank Of and GVS SPA

Assuming the 90 days horizon The Bank of is expected to generate 0.89 times more return on investment than GVS SPA. However, The Bank of is 1.12 times less risky than GVS SPA. It trades about 0.03 of its potential returns per unit of risk. GVS SPA is currently generating about 0.02 per unit of risk. If you would invest  7,336  in The Bank of on December 21, 2024 and sell it today you would earn a total of  173.00  from holding The Bank of or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Bank of  vs.  GVS SPA

The Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GVS SPA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GVS SPA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GVS SPA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Of and GVS SPA

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

The idea behind The Bank of and GVS SPA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.