Correlation Between GBS Software and Anheuser Busch

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

By analyzing existing cross correlation between GBS Software AG and Anheuser Busch InBev SANV, you can compare the effects of market volatilities on GBS Software and Anheuser Busch 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 GBS Software with a short position of Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and Anheuser Busch.

Diversification Opportunities for GBS Software and Anheuser Busch

-0.69

Correlation Coefficient

GBS Software  Anheuser Busch

Excellent diversification

The 3 months correlation between GBS and Anheuser is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev and GBS Software 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 GBS Software AG are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of GBS Software i.e., GBS Software and Anheuser Busch go up and down completely randomly.

Pair Corralation between GBS Software and Anheuser Busch

Assuming the 90 days trading horizon GBS Software is expected to generate 4.61 times less return on investment than Anheuser Busch. In addition to that, GBS Software is 1.21 times more volatile than Anheuser Busch InBev SANV. It trades about 0.03 of its total potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about 0.19 per unit of volatility. If you would invest  4,815  in Anheuser Busch InBev SANV on December 21, 2024 and sell it today you would earn a total of  991.00  from holding Anheuser Busch InBev SANV or generate 20.58% return on investment over 90 days.

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

GBS Software AG  vs.  Anheuser Busch InBev SANV

GBS Software AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GBS Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Anheuser Busch InBev

Risk-Adjusted Performance

Good

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak primary indicators, Anheuser Busch displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBS Software and Anheuser Busch

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

The idea behind GBS Software AG and Anheuser Busch InBev SANV 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.