Correlation Between GDS Holdings and Broadridge Financial

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

By analyzing existing cross correlation between GDS Holdings and Broadridge Financial Solutions, you can compare the effects of market volatilities on GDS Holdings and Broadridge Financial 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 GDS Holdings with a short position of Broadridge Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GDS Holdings and Broadridge Financial.

Diversification Opportunities for GDS Holdings and Broadridge Financial

-0.35

Correlation Coefficient

GDS Holdings  Broadridge Financial

Very good diversification

The 3 months correlation between GDS and Broadridge is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding GDS Holdings and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial and GDS Holdings 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 GDS Holdings are associated (or correlated) with Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of GDS Holdings i.e., GDS Holdings and Broadridge Financial go up and down completely randomly.

Pair Corralation between GDS Holdings and Broadridge Financial

Considering the 90-day investment horizon GDS Holdings is expected to generate 4.0 times more return on investment than Broadridge Financial. However, GDS Holdings is 4.0 times more volatile than Broadridge Financial Solutions. It trades about 0.14 of its potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.09 per unit of risk. If you would invest  1,182  in GDS Holdings on October 4, 2024 and sell it today you would earn a total of  1,173  from holding GDS Holdings or generate 99.24% return on investment over 90 days.

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

GDS Holdings  vs.  Broadridge Financial Solutions

GDS Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GDS Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, GDS Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Broadridge Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Broadridge Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GDS Holdings and Broadridge Financial

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

The idea behind GDS Holdings and Broadridge Financial Solutions 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.