Correlation Between KINGBOARD CHEMICAL and GBS Software

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

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

Diversification Opportunities for KINGBOARD CHEMICAL and GBS Software

-0.36

Correlation Coefficient

KINGBOARD CHEMICAL  GBS Software

Very good diversification

The 3 months correlation between KINGBOARD and GBS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software AG and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL are associated (or correlated) with GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and GBS Software go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and GBS Software

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.29 times more return on investment than GBS Software. However, KINGBOARD CHEMICAL is 1.29 times more volatile than GBS Software AG. It trades about 0.15 of its potential returns per unit of risk. GBS Software AG is currently generating about 0.03 per unit of risk. If you would invest  224.00  in KINGBOARD CHEMICAL on December 22, 2024 and sell it today you would earn a total of  52.00  from holding KINGBOARD CHEMICAL or generate 23.21% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  GBS Software AG

KINGBOARD CHEMICAL

Risk-Adjusted Performance

Good

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

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.

Pair Trading with KINGBOARD CHEMICAL and GBS Software

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

The idea behind KINGBOARD CHEMICAL and GBS Software 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.