Correlation Between GrandTech and Answer Technology

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

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

Diversification Opportunities for GrandTech and Answer Technology

0.61

Correlation Coefficient

GrandTech  Answer Technology

Poor diversification

The 3 months correlation between GrandTech and Answer is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding GrandTech CG Systems and Answer Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Answer Technology and GrandTech 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 GrandTech CG Systems are associated (or correlated) with Answer Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Answer Technology has no effect on the direction of GrandTech i.e., GrandTech and Answer Technology go up and down completely randomly.

Pair Corralation between GrandTech and Answer Technology

Assuming the 90 days trading horizon GrandTech CG Systems is expected to under-perform the Answer Technology. But the stock apears to be less risky and, when comparing its historical volatility, GrandTech CG Systems is 1.24 times less risky than Answer Technology. The stock trades about -0.14 of its potential returns per unit of risk. The Answer Technology Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,290  in Answer Technology Co on September 15, 2024 and sell it today you would lose (170.00) from holding Answer Technology Co or give up 3.21% of portfolio value over 90 days.

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

GrandTech CG Systems  vs.  Answer Technology Co

GrandTech CG Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrandTech CG Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Answer Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Answer Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Answer Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GrandTech and Answer Technology

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

The idea behind GrandTech CG Systems and Answer Technology Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.