Correlation Between GBS Software and First Quantum

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

Diversification Opportunities for GBS Software and First Quantum

0.31

Correlation Coefficient

GBS Software  First Quantum

Weak diversification

The 3 months correlation between GBS and First is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of GBS Software i.e., GBS Software and First Quantum go up and down completely randomly.

Pair Corralation between GBS Software and First Quantum

Assuming the 90 days trading horizon GBS Software is expected to generate 2.2 times less return on investment than First Quantum. But when comparing it to its historical volatility, GBS Software AG is 1.81 times less risky than First Quantum. It trades about 0.08 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,157  in First Quantum Minerals on December 20, 2024 and sell it today you would earn a total of  243.00  from holding First Quantum Minerals or generate 21.0% 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.  First Quantum Minerals

GBS Software AG

Risk-Adjusted Performance

OK

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

First Quantum Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, First Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBS Software and First Quantum

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

The idea behind GBS Software AG and First Quantum Minerals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.