Correlation Between GB Group and Eagle Eye

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

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

Diversification Opportunities for GB Group and Eagle Eye

0.25

Correlation Coefficient

GB Group  Eagle Eye

Modest diversification

The 3 months correlation between GBG and Eagle is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding GB Group plc and Eagle Eye Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Eye Solutions and GB Group 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 GB Group plc are associated (or correlated) with Eagle Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Eye Solutions has no effect on the direction of GB Group i.e., GB Group and Eagle Eye go up and down completely randomly.

Pair Corralation between GB Group and Eagle Eye

Assuming the 90 days trading horizon GB Group plc is expected to generate 3.08 times more return on investment than Eagle Eye. However, GB Group is 3.08 times more volatile than Eagle Eye Solutions. It trades about 0.07 of its potential returns per unit of risk. Eagle Eye Solutions is currently generating about 0.05 per unit of risk. 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

GB Group plc  vs.  Eagle Eye Solutions

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.

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.

Pair Trading with GB Group and Eagle Eye

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

The idea behind GB Group plc and Eagle Eye Solutions 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.

Check out your portfolio center.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.