Correlation Between AKD Hospitality and Gatron Industries

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

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

Diversification Opportunities for AKD Hospitality and Gatron Industries

-0.23

Correlation Coefficient

AKD Hospitality  Gatron Industries

Very good diversification

The 3 months correlation between AKD and Gatron is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and Gatron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatron Industries and AKD Hospitality 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 AKD Hospitality are associated (or correlated) with Gatron Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatron Industries has no effect on the direction of AKD Hospitality i.e., AKD Hospitality and Gatron Industries go up and down completely randomly.

Pair Corralation between AKD Hospitality and Gatron Industries

Assuming the 90 days trading horizon AKD Hospitality is expected to under-perform the Gatron Industries. But the stock apears to be less risky and, when comparing its historical volatility, AKD Hospitality is 1.84 times less risky than Gatron Industries. The stock trades about -0.42 of its potential returns per unit of risk. The Gatron Industries is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  15,599  in Gatron Industries on December 2, 2024 and sell it today you would lose (1,242) from holding Gatron Industries or give up 7.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

AKD Hospitality  vs.  Gatron Industries

AKD Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKD Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, AKD Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gatron Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gatron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AKD Hospitality and Gatron Industries

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

The idea behind AKD Hospitality and Gatron Industries 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.