Correlation Between Data Modul and GMO Internet

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

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

Diversification Opportunities for Data Modul and GMO Internet

-0.21

Correlation Coefficient

Data Modul  GMO Internet

Very good diversification

The 3 months correlation between Data and GMO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Data Modul 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 Data Modul AG are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Data Modul i.e., Data Modul and GMO Internet go up and down completely randomly.

Pair Corralation between Data Modul and GMO Internet

Assuming the 90 days trading horizon Data Modul AG is expected to under-perform the GMO Internet. In addition to that, Data Modul is 1.86 times more volatile than GMO Internet. It trades about -0.05 of its total potential returns per unit of risk. GMO Internet is currently generating about 0.04 per unit of volatility. If you would invest  1,610  in GMO Internet on October 25, 2024 and sell it today you would earn a total of  10.00  from holding GMO Internet or generate 0.62% return on investment over 90 days.

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

Data Modul AG  vs.  GMO Internet

Data Modul AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Data Modul and GMO Internet

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

The idea behind Data Modul AG and GMO Internet 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.