Correlation Between GBS Software and Gentex

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

Diversification Opportunities for GBS Software and Gentex

-0.18

Correlation Coefficient

GBS Software  Gentex

Good diversification

The 3 months correlation between GBS and Gentex is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of GBS Software i.e., GBS Software and Gentex go up and down completely randomly.

Pair Corralation between GBS Software and Gentex

Assuming the 90 days trading horizon GBS Software AG is expected to generate 3.93 times more return on investment than Gentex. However, GBS Software is 3.93 times more volatile than Gentex. It trades about 0.31 of its potential returns per unit of risk. Gentex is currently generating about -0.79 per unit of risk. If you would invest  258.00  in GBS Software AG on October 12, 2024 and sell it today you would earn a total of  40.00  from holding GBS Software AG or generate 15.5% return on investment over 90 days.

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

GBS Software AG  vs.  Gentex

GBS Software AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gentex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GBS Software and Gentex

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

The idea behind GBS Software AG and Gentex 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..