Correlation Between SPECTRAL MEDICAL and GBS Software

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

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

Diversification Opportunities for SPECTRAL MEDICAL and GBS Software

-0.34

Correlation Coefficient

SPECTRAL MEDICAL  GBS Software

Very good diversification

The 3 months correlation between SPECTRAL and GBS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 SPECTRAL MEDICAL i.e., SPECTRAL MEDICAL and GBS Software go up and down completely randomly.

Pair Corralation between SPECTRAL MEDICAL and GBS Software

Assuming the 90 days horizon SPECTRAL MEDICAL is expected to generate 2.29 times more return on investment than GBS Software. However, SPECTRAL MEDICAL is 2.29 times more volatile than GBS Software AG. It trades about 0.04 of its potential returns per unit of risk. GBS Software AG is currently generating about 0.04 per unit of risk. If you would invest  25.00  in SPECTRAL MEDICAL on October 11, 2024 and sell it today you would earn a total of  11.00  from holding SPECTRAL MEDICAL or generate 44.0% return on investment over 90 days.

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

SPECTRAL MEDICAL  vs.  GBS Software AG

SPECTRAL MEDICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPECTRAL MEDICAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPECTRAL MEDICAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GBS Software AG

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPECTRAL MEDICAL and GBS Software

The main advantage of trading using opposite SPECTRAL MEDICAL and GBS Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.