Correlation Between Spectra Systems and GB Group

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

By analyzing existing cross correlation between Spectra Systems Corp and GB Group plc, you can compare the effects of market volatilities on Spectra Systems and GB Group 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 Spectra Systems with a short position of GB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectra Systems and GB Group.

Diversification Opportunities for Spectra Systems and GB Group

-0.03

Correlation Coefficient

Spectra Systems  GB Group

Good diversification

The 3 months correlation between Spectra and GBG is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Spectra Systems Corp and GB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Group plc and Spectra Systems 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 Spectra Systems Corp are associated (or correlated) with GB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Group plc has no effect on the direction of Spectra Systems i.e., Spectra Systems and GB Group go up and down completely randomly.

Pair Corralation between Spectra Systems and GB Group

Assuming the 90 days trading horizon Spectra Systems Corp is expected to generate 1.03 times more return on investment than GB Group. However, Spectra Systems is 1.03 times more volatile than GB Group plc. It trades about -0.04 of its potential returns per unit of risk. GB Group plc is currently generating about -0.11 per unit of risk. If you would invest  23,200  in Spectra Systems Corp on December 30, 2024 and sell it today you would lose (1,200) from holding Spectra Systems Corp or give up 5.17% of portfolio value over 90 days.

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

Spectra Systems Corp  vs.  GB Group plc

Spectra Systems Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spectra Systems Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Spectra Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GB Group plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Spectra Systems and GB Group

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

The idea behind Spectra Systems Corp and GB Group plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.