Correlation Between GBS Software and Wilmar International

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

Diversification Opportunities for GBS Software and Wilmar International

-0.09

Correlation Coefficient

GBS Software  Wilmar International

Good diversification

The 3 months correlation between GBS and Wilmar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Wilmar International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of GBS Software i.e., GBS Software and Wilmar International go up and down completely randomly.

Pair Corralation between GBS Software and Wilmar International

Assuming the 90 days trading horizon GBS Software is expected to generate 3.14 times less return on investment than Wilmar International. But when comparing it to its historical volatility, GBS Software AG is 1.14 times less risky than Wilmar International. It trades about 0.03 of its potential returns per unit of risk. Wilmar International Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  209.00  in Wilmar International Limited on December 21, 2024 and sell it today you would earn a total of  26.00  from holding Wilmar International Limited or generate 12.44% 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.  Wilmar International Limited

GBS Software AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GBS Software is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Wilmar International

Risk-Adjusted Performance

OK

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

Pair Trading with GBS Software and Wilmar International

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

The idea behind GBS Software AG and Wilmar International Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.