Correlation Between GMO Internet and Data Modul

Can any of the company-specific risk be diversified away by investing in both GMO Internet and Data Modul 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 GMO Internet and Data Modul into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GMO Internet and Data Modul AG, you can compare the effects of market volatilities on GMO Internet and Data Modul 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 GMO Internet with a short position of Data Modul. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Data Modul.

Diversification Opportunities for GMO Internet and Data Modul

0.02

Correlation Coefficient

GMO Internet  Data Modul

Significant diversification

The 3 months correlation between GMO and Data is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Data Modul AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Modul AG and GMO Internet 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 GMO Internet are associated (or correlated) with Data Modul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Modul AG has no effect on the direction of GMO Internet i.e., GMO Internet and Data Modul go up and down completely randomly.

Pair Corralation between GMO Internet and Data Modul

Assuming the 90 days horizon GMO Internet is expected to under-perform the Data Modul. But the stock apears to be less risky and, when comparing its historical volatility, GMO Internet is 1.61 times less risky than Data Modul. The stock trades about -0.17 of its potential returns per unit of risk. The Data Modul AG is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,780  in Data Modul AG on October 10, 2024 and sell it today you would lose (40.00) from holding Data Modul AG or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GMO Internet  vs.  Data Modul AG

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Data Modul AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Modul AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Data Modul may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GMO Internet and Data Modul

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

The idea behind GMO Internet and Data Modul AG 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.