Correlation Between GIB Capital and Environmental Control

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

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

Diversification Opportunities for GIB Capital and Environmental Control

-0.09

Correlation Coefficient

GIB Capital  Environmental Control

Good diversification

The 3 months correlation between GIB and Environmental is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding GIB Capital Group and Environmental Control Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environmental Control and GIB Capital 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 GIB Capital Group are associated (or correlated) with Environmental Control. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environmental Control has no effect on the direction of GIB Capital i.e., GIB Capital and Environmental Control go up and down completely randomly.

Pair Corralation between GIB Capital and Environmental Control

Given the investment horizon of 90 days GIB Capital Group is expected to under-perform the Environmental Control. But the pink sheet apears to be less risky and, when comparing its historical volatility, GIB Capital Group is 7.01 times less risky than Environmental Control. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Environmental Control Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Environmental Control Corp on December 21, 2024 and sell it today you would lose (0.20) from holding Environmental Control Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

GIB Capital Group  vs.  Environmental Control Corp

GIB Capital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days GIB Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Environmental Control

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Environmental Control Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Environmental Control displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GIB Capital and Environmental Control

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

The idea behind GIB Capital Group and Environmental Control Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.