Correlation Between Penpower Technology and GCS Holdings

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

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

Diversification Opportunities for Penpower Technology and GCS Holdings

0.6

Correlation Coefficient

Penpower Technology  GCS Holdings

Poor diversification

The 3 months correlation between Penpower and GCS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penpower Technology and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings and Penpower Technology 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 Penpower Technology 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 Penpower Technology i.e., Penpower Technology and GCS Holdings go up and down completely randomly.

Pair Corralation between Penpower Technology and GCS Holdings

Assuming the 90 days trading horizon Penpower Technology is expected to generate 11.68 times less return on investment than GCS Holdings. But when comparing it to its historical volatility, Penpower Technology is 1.89 times less risky than GCS Holdings. It trades about 0.05 of its potential returns per unit of risk. GCS Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,950  in GCS Holdings on September 15, 2024 and sell it today you would earn a total of  5,350  from holding GCS Holdings or generate 135.44% return on investment over 90 days.

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

Penpower Technology  vs.  GCS Holdings

Penpower Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Penpower Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GCS Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GCS Holdings are ranked lower than 25 (%) 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 Penpower Technology and GCS Holdings

The main advantage of trading using opposite Penpower Technology and GCS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penpower Technology 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 Penpower Technology 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.