Correlation Between Gamma Communications and Wilmar International

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

By analyzing existing cross correlation between Gamma Communications plc and Wilmar International Limited, you can compare the effects of market volatilities on Gamma Communications and Wilmar International 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 Gamma Communications with a short position of Wilmar International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Wilmar International.

Diversification Opportunities for Gamma Communications and Wilmar International

0.26

Correlation Coefficient

Gamma Communications  Wilmar International

Modest diversification

The 3 months correlation between Gamma and Wilmar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and Wilmar International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International and Gamma Communications 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 Gamma Communications plc are associated (or correlated) with Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Gamma Communications i.e., Gamma Communications and Wilmar International go up and down completely randomly.

Pair Corralation between Gamma Communications and Wilmar International

Assuming the 90 days horizon Gamma Communications plc is expected to generate 1.29 times more return on investment than Wilmar International. However, Gamma Communications is 1.29 times more volatile than Wilmar International Limited. It trades about 0.05 of its potential returns per unit of risk. Wilmar International Limited is currently generating about -0.01 per unit of risk. If you would invest  1,188  in Gamma Communications plc on October 21, 2024 and sell it today you would earn a total of  372.00  from holding Gamma Communications plc or generate 31.31% return on investment over 90 days.

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

Gamma Communications plc  vs.  Wilmar International Limited

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gamma Communications and Wilmar International

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

The idea behind Gamma Communications plc and Wilmar International Limited 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.