Correlation Between Stratasys and GMO Internet

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

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

Diversification Opportunities for Stratasys and GMO Internet

0.32

Correlation Coefficient

Stratasys  GMO Internet

Weak diversification

The 3 months correlation between Stratasys and GMO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Stratasys 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 Stratasys 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 Stratasys i.e., Stratasys and GMO Internet go up and down completely randomly.

Pair Corralation between Stratasys and GMO Internet

Given the investment horizon of 90 days Stratasys is expected to under-perform the GMO Internet. In addition to that, Stratasys is 1.74 times more volatile than GMO Internet. It trades about -0.17 of its total potential returns per unit of risk. GMO Internet is currently generating about -0.16 per unit of volatility. If you would invest  1,775  in GMO Internet on October 10, 2024 and sell it today you would lose (95.00) from holding GMO Internet or give up 5.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Stratasys  vs.  GMO Internet

Stratasys

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Stratasys and GMO Internet

The main advantage of trading using opposite Stratasys and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stratasys 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 Stratasys 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.