Correlation Between GBS Software and Boeing

Can any of the company-specific risk be diversified away by investing in both GBS Software and Boeing 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 Boeing 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 The Boeing, you can compare the effects of market volatilities on GBS Software and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and Boeing.

Diversification Opportunities for GBS Software and Boeing

0.22

Correlation Coefficient

GBS Software  Boeing

Modest diversification

The 3 months correlation between GBS and Boeing is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of GBS Software i.e., GBS Software and Boeing go up and down completely randomly.

Pair Corralation between GBS Software and Boeing

Assuming the 90 days trading horizon GBS Software AG is expected to generate 0.82 times more return on investment than Boeing. However, GBS Software AG is 1.22 times less risky than Boeing. It trades about 0.03 of its potential returns per unit of risk. The Boeing is currently generating about -0.03 per unit of risk. If you would invest  262.00  in GBS Software AG on December 21, 2024 and sell it today you would earn a total of  8.00  from holding GBS Software AG or generate 3.05% return on investment over 90 days.

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

GBS Software AG  vs.  The Boeing

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Boeing

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Boeing is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GBS Software and Boeing

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

The idea behind GBS Software AG and The Boeing 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..