Correlation Between GSE Systems and Data Storage

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

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

Diversification Opportunities for GSE Systems and Data Storage

0.72

Correlation Coefficient

GSE Systems  Data Storage

Poor diversification

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

Pair Corralation between GSE Systems and Data Storage

Considering the 90-day investment horizon GSE Systems is expected to generate 1.85 times more return on investment than Data Storage. However, GSE Systems is 1.85 times more volatile than Data Storage Corp. It trades about 0.08 of its potential returns per unit of risk. Data Storage Corp is currently generating about 0.1 per unit of risk. If you would invest  164.00  in GSE Systems on January 19, 2024 and sell it today you would earn a total of  88.00  from holding GSE Systems or generate 53.66% return on investment over 90 days.

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

GSE Systems  vs.  Data Storage Corp

GSE Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GSE Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, GSE Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Data Storage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Data Storage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GSE Systems and Data Storage

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

The idea behind GSE Systems and Data Storage Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.