Correlation Between Microlise Group and GB Group

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

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

Diversification Opportunities for Microlise Group and GB Group

-0.72

Correlation Coefficient

Microlise Group  GB Group

Pay attention - limited upside

The 3 months correlation between Microlise and GBG is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microlise Group PLC 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 Microlise 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 Microlise Group PLC 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 Microlise Group i.e., Microlise Group and GB Group go up and down completely randomly.

Pair Corralation between Microlise Group and GB Group

Assuming the 90 days trading horizon Microlise Group PLC is expected to under-perform the GB Group. In addition to that, Microlise Group is 1.17 times more volatile than GB Group plc. It trades about -0.11 of its total potential returns per unit of risk. GB Group plc is currently generating about 0.07 per unit of volatility. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microlise Group PLC  vs.  GB Group plc

Microlise Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microlise Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Microlise Group and GB Group

The main advantage of trading using opposite Microlise Group and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microlise Group 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 Microlise Group PLC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.