Correlation Between GI Group and Develia SA

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

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

Diversification Opportunities for GI Group and Develia SA

0.55

Correlation Coefficient

GI Group  Develia SA

Very weak diversification

The 3 months correlation between GIG and Develia is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding GI Group Poland and Develia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Develia SA and GI 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 GI Group Poland are associated (or correlated) with Develia SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Develia SA has no effect on the direction of GI Group i.e., GI Group and Develia SA go up and down completely randomly.

Pair Corralation between GI Group and Develia SA

Assuming the 90 days trading horizon GI Group Poland is expected to generate 1.82 times more return on investment than Develia SA. However, GI Group is 1.82 times more volatile than Develia SA. It trades about 0.13 of its potential returns per unit of risk. Develia SA is currently generating about 0.14 per unit of risk. If you would invest  143.00  in GI Group Poland on December 30, 2024 and sell it today you would earn a total of  39.00  from holding GI Group Poland or generate 27.27% return on investment over 90 days.

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

GI Group Poland  vs.  Develia SA

GI Group Poland

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GI Group Poland are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, GI Group reported solid returns over the last few months and may actually be approaching a breakup point.

Develia SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Develia SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Develia SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GI Group and Develia SA

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

The idea behind GI Group Poland and Develia SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .