Correlation Between GBS Software and AURUBIS AG

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

Diversification Opportunities for GBS Software and AURUBIS AG

0.12

Correlation Coefficient

GBS Software  AURUBIS AG

Average diversification

The 3 months correlation between GBS and AURUBIS is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and AURUBIS AG UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS AG UNSPADR 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 AURUBIS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS AG UNSPADR has no effect on the direction of GBS Software i.e., GBS Software and AURUBIS AG go up and down completely randomly.

Pair Corralation between GBS Software and AURUBIS AG

Assuming the 90 days trading horizon GBS Software AG is expected to generate 1.3 times more return on investment than AURUBIS AG. However, GBS Software is 1.3 times more volatile than AURUBIS AG UNSPADR. It trades about 0.31 of its potential returns per unit of risk. AURUBIS AG UNSPADR is currently generating about -0.22 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GBS Software AG  vs.  AURUBIS AG UNSPADR

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.

AURUBIS AG UNSPADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS AG UNSPADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AURUBIS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBS Software and AURUBIS AG

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

The idea behind GBS Software AG and AURUBIS AG UNSPADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.