Correlation Between GSTechnologies and Booking Holdings

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

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

Diversification Opportunities for GSTechnologies and Booking Holdings

0.72

Correlation Coefficient

GSTechnologies  Booking Holdings

Poor diversification

The 3 months correlation between GSTechnologies and Booking is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GSTechnologies and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings and GSTechnologies 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 GSTechnologies are associated (or correlated) with Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of GSTechnologies i.e., GSTechnologies and Booking Holdings go up and down completely randomly.

Pair Corralation between GSTechnologies and Booking Holdings

Assuming the 90 days trading horizon GSTechnologies is expected to generate 1.28 times less return on investment than Booking Holdings. But when comparing it to its historical volatility, GSTechnologies is 1.79 times less risky than Booking Holdings. It trades about 0.09 of its potential returns per unit of risk. Booking Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  348,844  in Booking Holdings on September 24, 2024 and sell it today you would earn a total of  158,656  from holding Booking Holdings or generate 45.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

GSTechnologies  vs.  Booking Holdings

GSTechnologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Booking Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GSTechnologies and Booking Holdings

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

The idea behind GSTechnologies and Booking Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.