Correlation Between GP Investments and OSX Brasil

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

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

Diversification Opportunities for GP Investments and OSX Brasil

-0.26

Correlation Coefficient

GP Investments  OSX Brasil

Very good diversification

The 3 months correlation between GPIV33 and OSX is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and OSX Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSX Brasil SA and GP Investments 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 GP Investments are associated (or correlated) with OSX Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSX Brasil SA has no effect on the direction of GP Investments i.e., GP Investments and OSX Brasil go up and down completely randomly.

Pair Corralation between GP Investments and OSX Brasil

Assuming the 90 days trading horizon GP Investments is expected to generate 0.8 times more return on investment than OSX Brasil. However, GP Investments is 1.25 times less risky than OSX Brasil. It trades about 0.1 of its potential returns per unit of risk. OSX Brasil SA is currently generating about -0.31 per unit of risk. If you would invest  380.00  in GP Investments on September 5, 2024 and sell it today you would earn a total of  20.00  from holding GP Investments or generate 5.26% return on investment over 90 days.

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

GP Investments  vs.  OSX Brasil SA

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

OSX Brasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OSX Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OSX Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GP Investments and OSX Brasil

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

The idea behind GP Investments and OSX Brasil 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.