Correlation Between Railway Signal and GKHT Medical

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

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

Diversification Opportunities for Railway Signal and GKHT Medical

0.96

Correlation Coefficient

Railway Signal  GKHT Medical

Almost no diversification

The 3 months correlation between Railway and GKHT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Railway Signal Communication and GKHT Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GKHT Medical Technology and Railway Signal 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 Railway Signal Communication are associated (or correlated) with GKHT Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GKHT Medical Technology has no effect on the direction of Railway Signal i.e., Railway Signal and GKHT Medical go up and down completely randomly.

Pair Corralation between Railway Signal and GKHT Medical

Assuming the 90 days trading horizon Railway Signal Communication is expected to under-perform the GKHT Medical. But the stock apears to be less risky and, when comparing its historical volatility, Railway Signal Communication is 1.96 times less risky than GKHT Medical. The stock trades about -0.18 of its potential returns per unit of risk. The GKHT Medical Technology is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,212  in GKHT Medical Technology on September 21, 2024 and sell it today you would lose (46.00) from holding GKHT Medical Technology or give up 3.8% of portfolio value over 90 days.

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

Railway Signal Communication  vs.  GKHT Medical Technology

Railway Signal Commu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

GKHT Medical Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GKHT Medical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GKHT Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Railway Signal and GKHT Medical

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

The idea behind Railway Signal Communication and GKHT Medical Technology 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.