Correlation Between ABB and GomSpace Group

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

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

Diversification Opportunities for ABB and GomSpace Group

-0.23

Correlation Coefficient

ABB  GomSpace Group

Very good diversification

The 3 months correlation between ABB and GomSpace is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ABB and GomSpace Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GomSpace Group AB and ABB 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 ABB are associated (or correlated) with GomSpace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GomSpace Group AB has no effect on the direction of ABB i.e., ABB and GomSpace Group go up and down completely randomly.

Pair Corralation between ABB and GomSpace Group

Assuming the 90 days trading horizon ABB is expected to generate 0.33 times more return on investment than GomSpace Group. However, ABB is 3.08 times less risky than GomSpace Group. It trades about 0.18 of its potential returns per unit of risk. GomSpace Group AB is currently generating about 0.0 per unit of risk. If you would invest  56,720  in ABB on September 12, 2024 and sell it today you would earn a total of  7,080  from holding ABB or generate 12.48% return on investment over 90 days.

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

ABB  vs.  GomSpace Group AB

ABB

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ABB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GomSpace Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GomSpace Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GomSpace Group 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 ABB and GomSpace Group

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

The idea behind ABB and GomSpace Group AB 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.