Correlation Between Eagle Eye and GB Group

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

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

Diversification Opportunities for Eagle Eye and GB Group

0.25

Correlation Coefficient

Eagle Eye  GB Group

Modest diversification

The 3 months correlation between Eagle and GBG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Eye Solutions 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 Eagle Eye 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 Eagle Eye Solutions 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 Eagle Eye i.e., Eagle Eye and GB Group go up and down completely randomly.

Pair Corralation between Eagle Eye and GB Group

Assuming the 90 days trading horizon Eagle Eye is expected to generate 4.12 times less return on investment than GB Group. But when comparing it to its historical volatility, Eagle Eye Solutions is 3.08 times less risky than GB Group. It trades about 0.05 of its potential returns per unit of risk. GB Group plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31,260  in GB Group plc on September 23, 2024 and sell it today you would earn a total of  3,260  from holding GB Group plc or generate 10.43% return on investment over 90 days.

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

Eagle Eye Solutions  vs.  GB Group plc

Eagle Eye Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Eye Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Eagle Eye is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

GB Group plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GB Group plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GB Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Eye and GB Group

The main advantage of trading using opposite Eagle Eye and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Eye 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 Eagle Eye Solutions 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.