Correlation Between GSTechnologies and Xaar Plc

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

By analyzing existing cross correlation between GSTechnologies and Xaar plc, you can compare the effects of market volatilities on GSTechnologies and Xaar Plc 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 GSTechnologies with a short position of Xaar Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSTechnologies and Xaar Plc.

Diversification Opportunities for GSTechnologies and Xaar Plc

-0.61

Correlation Coefficient

GSTechnologies  Xaar Plc

Excellent diversification

The 3 months correlation between GSTechnologies and Xaar is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GSTechnologies and Xaar plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xaar plc and GSTechnologies 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 GSTechnologies are associated (or correlated) with Xaar Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xaar plc has no effect on the direction of GSTechnologies i.e., GSTechnologies and Xaar Plc go up and down completely randomly.

Pair Corralation between GSTechnologies and Xaar Plc

Assuming the 90 days trading horizon GSTechnologies is expected to generate 1.97 times more return on investment than Xaar Plc. However, GSTechnologies is 1.97 times more volatile than Xaar plc. It trades about 0.23 of its potential returns per unit of risk. Xaar plc is currently generating about -0.07 per unit of risk. If you would invest  73.00  in GSTechnologies on October 18, 2024 and sell it today you would earn a total of  124.00  from holding GSTechnologies or generate 169.86% return on investment over 90 days.

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

GSTechnologies  vs.  Xaar plc

GSTechnologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Xaar plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xaar plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GSTechnologies and Xaar Plc

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

The idea behind GSTechnologies and Xaar plc 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..