Correlation Between GP Investments and Charles Schwab

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

By analyzing existing cross correlation between GP Investments and The Charles Schwab, you can compare the effects of market volatilities on GP Investments and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and Charles Schwab.

Diversification Opportunities for GP Investments and Charles Schwab

-0.42

Correlation Coefficient

GP Investments  Charles Schwab

Very good diversification

The 3 months correlation between GPIV33 and Charles is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of GP Investments i.e., GP Investments and Charles Schwab go up and down completely randomly.

Pair Corralation between GP Investments and Charles Schwab

Assuming the 90 days trading horizon GP Investments is expected to generate 3.18 times more return on investment than Charles Schwab. However, GP Investments is 3.18 times more volatile than The Charles Schwab. It trades about -0.02 of its potential returns per unit of risk. The Charles Schwab is currently generating about -0.12 per unit of risk. If you would invest  406.00  in GP Investments on September 27, 2024 and sell it today you would lose (13.00) from holding GP Investments or give up 3.2% of portfolio value over 90 days.

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

GP Investments  vs.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Charles Schwab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GP Investments and Charles Schwab

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

The idea behind GP Investments and The Charles Schwab 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..