Correlation Between Giant Manufacturing and Gemtek Technology

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

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

Diversification Opportunities for Giant Manufacturing and Gemtek Technology

-0.12

Correlation Coefficient

Giant Manufacturing  Gemtek Technology

Good diversification

The 3 months correlation between Giant and Gemtek is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Gemtek Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemtek Technology and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Gemtek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemtek Technology has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Gemtek Technology go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Gemtek Technology

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to generate 1.72 times more return on investment than Gemtek Technology. However, Giant Manufacturing is 1.72 times more volatile than Gemtek Technology Co. It trades about 0.03 of its potential returns per unit of risk. Gemtek Technology Co is currently generating about -0.1 per unit of risk. If you would invest  14,500  in Giant Manufacturing Co on December 27, 2024 and sell it today you would earn a total of  300.00  from holding Giant Manufacturing Co or generate 2.07% return on investment over 90 days.

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

Giant Manufacturing Co  vs.  Gemtek Technology Co

Giant Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Giant Manufacturing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gemtek Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gemtek Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Pair Trading with Giant Manufacturing and Gemtek Technology

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

The idea behind Giant Manufacturing Co and Gemtek 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.