Correlation Between GBS Software and RTL Group

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

Diversification Opportunities for GBS Software and RTL Group

-0.13

Correlation Coefficient

GBS Software  RTL Group

Good diversification

The 3 months correlation between GBS and RTL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of GBS Software i.e., GBS Software and RTL Group go up and down completely randomly.

Pair Corralation between GBS Software and RTL Group

Assuming the 90 days trading horizon GBS Software is expected to generate 2.87 times less return on investment than RTL Group. In addition to that, GBS Software is 1.3 times more volatile than RTL Group SA. It trades about 0.08 of its total potential returns per unit of risk. RTL Group SA is currently generating about 0.3 per unit of volatility. If you would invest  2,625  in RTL Group SA on December 20, 2024 and sell it today you would earn a total of  915.00  from holding RTL Group SA or generate 34.86% 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.  RTL Group SA

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.

RTL Group SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, RTL Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBS Software and RTL Group

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

The idea behind GBS Software AG and RTL Group SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.