Correlation Between GBS Software and PG E

Can any of the company-specific risk be diversified away by investing in both GBS Software and PG E 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 PG E 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 PG E P6, you can compare the effects of market volatilities on GBS Software and PG E 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 PG E. Check out your portfolio center. Please also check ongoing floating volatility patterns of GBS Software and PG E.

Diversification Opportunities for GBS Software and PG E

0.12

Correlation Coefficient

GBS Software  PG E

Average diversification

The 3 months correlation between GBS and PCG6 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and PG E P6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PG E P6 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 PG E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PG E P6 has no effect on the direction of GBS Software i.e., GBS Software and PG E go up and down completely randomly.

Pair Corralation between GBS Software and PG E

Assuming the 90 days trading horizon GBS Software AG is expected to generate 1.76 times more return on investment than PG E. However, GBS Software is 1.76 times more volatile than PG E P6. It trades about 0.42 of its potential returns per unit of risk. PG E P6 is currently generating about 0.04 per unit of risk. If you would invest  262.00  in GBS Software AG on October 25, 2024 and sell it today you would earn a total of  50.00  from holding GBS Software AG or generate 19.08% 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.  PG E P6

GBS Software AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

PG E P6

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PG E P6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PG E 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 PG E

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

The idea behind GBS Software AG and PG E P6 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.