Correlation Between Computer Age and GM Breweries

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

By analyzing existing cross correlation between Computer Age Management and GM Breweries Limited, you can compare the effects of market volatilities on Computer Age and GM Breweries 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 Computer Age with a short position of GM Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and GM Breweries.

Diversification Opportunities for Computer Age and GM Breweries

0.88

Correlation Coefficient

Computer Age  GM Breweries

Very poor diversification

The 3 months correlation between Computer and GMBREW is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries Limited and Computer Age 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 Computer Age Management are associated (or correlated) with GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of Computer Age i.e., Computer Age and GM Breweries go up and down completely randomly.

Pair Corralation between Computer Age and GM Breweries

Assuming the 90 days trading horizon Computer Age Management is expected to generate 1.24 times more return on investment than GM Breweries. However, Computer Age is 1.24 times more volatile than GM Breweries Limited. It trades about -0.11 of its potential returns per unit of risk. GM Breweries Limited is currently generating about -0.14 per unit of risk. If you would invest  490,515  in Computer Age Management on December 24, 2024 and sell it today you would lose (108,945) from holding Computer Age Management or give up 22.21% of portfolio value over 90 days.

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

Computer Age Management  vs.  GM Breweries Limited

Computer Age Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Computer Age Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GM Breweries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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 Computer Age and GM Breweries

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

The idea behind Computer Age Management and GM Breweries 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.