Correlation Between Wayside Technology and GMO Internet

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

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

Diversification Opportunities for Wayside Technology and GMO Internet

0.59

Correlation Coefficient

Wayside Technology  GMO Internet

Very weak diversification

The 3 months correlation between Wayside and GMO is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Wayside Technology 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 Wayside Technology Group are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Wayside Technology i.e., Wayside Technology and GMO Internet go up and down completely randomly.

Pair Corralation between Wayside Technology and GMO Internet

Assuming the 90 days horizon Wayside Technology is expected to generate 1.71 times less return on investment than GMO Internet. But when comparing it to its historical volatility, Wayside Technology Group is 2.42 times less risky than GMO Internet. It trades about 0.1 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  266.00  in GMO Internet on October 25, 2024 and sell it today you would earn a total of  1,354  from holding GMO Internet or generate 509.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Wayside Technology Group  vs.  GMO Internet

Wayside Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wayside Technology and GMO Internet

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

The idea behind Wayside Technology Group and GMO Internet 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.