Correlation Between GMO Internet and INFORMATION SVC

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

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

Diversification Opportunities for GMO Internet and INFORMATION SVC

-0.27

Correlation Coefficient

GMO Internet  INFORMATION SVC

Very good diversification

The 3 months correlation between GMO and INFORMATION is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of GMO Internet i.e., GMO Internet and INFORMATION SVC go up and down completely randomly.

Pair Corralation between GMO Internet and INFORMATION SVC

Assuming the 90 days horizon GMO Internet is expected to generate 0.86 times more return on investment than INFORMATION SVC. However, GMO Internet is 1.16 times less risky than INFORMATION SVC. It trades about 0.18 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about 0.02 per unit of risk. If you would invest  1,594  in GMO Internet on December 22, 2024 and sell it today you would earn a total of  376.00  from holding GMO Internet or generate 23.59% return on investment over 90 days.

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

GMO Internet  vs.  INFORMATION SVC GRP

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

INFORMATION SVC GRP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INFORMATION SVC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GMO Internet and INFORMATION SVC

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

The idea behind GMO Internet and INFORMATION SVC GRP 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.