Correlation Between GB Group and Neometals

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

By analyzing existing cross correlation between GB Group plc and Neometals, you can compare the effects of market volatilities on GB Group and Neometals 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 GB Group with a short position of Neometals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GB Group and Neometals.

Diversification Opportunities for GB Group and Neometals

0.24

Correlation Coefficient

GB Group  Neometals

Modest diversification

The 3 months correlation between GBG and Neometals is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding GB Group plc and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals and GB Group 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 GB Group plc are associated (or correlated) with Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of GB Group i.e., GB Group and Neometals go up and down completely randomly.

Pair Corralation between GB Group and Neometals

Assuming the 90 days trading horizon GB Group plc is expected to generate 0.37 times more return on investment than Neometals. However, GB Group plc is 2.72 times less risky than Neometals. It trades about 0.05 of its potential returns per unit of risk. Neometals is currently generating about -0.06 per unit of risk. If you would invest  31,420  in GB Group plc on October 24, 2024 and sell it today you would earn a total of  1,980  from holding GB Group plc or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

GB Group plc  vs.  Neometals

GB Group plc

Risk-Adjusted Performance

4 of 100

Insignificant

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

Neometals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GB Group and Neometals

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

The idea behind GB Group plc and Neometals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.