Correlation Between GBT Technologies and Direct Communication

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

By analyzing existing cross correlation between GBT Technologies and Direct Communication Solutions, you can compare the effects of market volatilities on GBT Technologies and Direct Communication 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 GBT Technologies with a short position of Direct Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBT Technologies and Direct Communication.

Diversification Opportunities for GBT Technologies and Direct Communication

0.75

Correlation Coefficient

GBT Technologies  Direct Communication

Poor diversification

The 3 months correlation between GBT and Direct is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GBT Technologies and Direct Communication Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Communication and GBT Technologies 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 GBT Technologies are associated (or correlated) with Direct Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Communication has no effect on the direction of GBT Technologies i.e., GBT Technologies and Direct Communication go up and down completely randomly.

Pair Corralation between GBT Technologies and Direct Communication

Given the investment horizon of 90 days GBT Technologies is expected to generate 4.64 times more return on investment than Direct Communication. However, GBT Technologies is 4.64 times more volatile than Direct Communication Solutions. It trades about 0.24 of its potential returns per unit of risk. Direct Communication Solutions is currently generating about 0.27 per unit of risk. If you would invest  0.01  in GBT Technologies on October 9, 2024 and sell it today you would earn a total of  0.01  from holding GBT Technologies or generate 100.0% return on investment over 90 days.

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

GBT Technologies  vs.  Direct Communication Solutions

GBT Technologies

Risk-Adjusted Performance

19 of 100

Solid

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

Direct Communication

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Communication Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Direct Communication showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBT Technologies and Direct Communication

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

The idea behind GBT Technologies and Direct Communication Solutions 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.