Correlation Between De Licacy and GCS Holdings

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

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

Diversification Opportunities for De Licacy and GCS Holdings

0.49

Correlation Coefficient

De Licacy  GCS Holdings

Very weak diversification

The 3 months correlation between 1464 and GCS is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings and De Licacy 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 De Licacy Industrial are associated (or correlated) with GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of De Licacy i.e., De Licacy and GCS Holdings go up and down completely randomly.

Pair Corralation between De Licacy and GCS Holdings

Assuming the 90 days trading horizon De Licacy is expected to generate 2.03 times less return on investment than GCS Holdings. But when comparing it to its historical volatility, De Licacy Industrial is 2.88 times less risky than GCS Holdings. It trades about 0.08 of its potential returns per unit of risk. GCS Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13,450  in GCS Holdings on October 24, 2024 and sell it today you would earn a total of  450.00  from holding GCS Holdings or generate 3.35% return on investment over 90 days.

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

De Licacy Industrial  vs.  GCS Holdings

De Licacy Industrial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GCS Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GCS Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GCS Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with De Licacy and GCS Holdings

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

The idea behind De Licacy Industrial and GCS 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.