Correlation Between GMO Internet and Rocket Internet

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

By analyzing existing cross correlation between GMO Internet and Rocket Internet SE, you can compare the effects of market volatilities on GMO Internet and Rocket Internet 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 Rocket Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Rocket Internet.

Diversification Opportunities for GMO Internet and Rocket Internet

0.62

Correlation Coefficient

GMO Internet  Rocket Internet

Poor diversification

The 3 months correlation between GMO and Rocket is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of GMO Internet i.e., GMO Internet and Rocket Internet go up and down completely randomly.

Pair Corralation between GMO Internet and Rocket Internet

Assuming the 90 days horizon GMO Internet is expected to generate 0.89 times more return on investment than Rocket Internet. However, GMO Internet is 1.12 times less risky than Rocket Internet. It trades about 0.15 of its potential returns per unit of risk. Rocket Internet SE is currently generating about 0.07 per unit of risk. If you would invest  1,614  in GMO Internet on December 20, 2024 and sell it today you would earn a total of  306.00  from holding GMO Internet or generate 18.96% return on investment over 90 days.

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

GMO Internet  vs.  Rocket Internet SE

GMO Internet

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Rocket Internet SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Rocket Internet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GMO Internet and Rocket Internet

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

The idea behind GMO Internet and Rocket Internet SE 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 Global Correlations module to find global opportunities by holding instruments from different markets.