Correlation Between Clean Science and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Clean Science and GACM Technologies 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 Clean Science and GACM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clean Science and and GACM Technologies Limited, you can compare the effects of market volatilities on Clean Science and GACM Technologies 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 Clean Science with a short position of GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Science and GACM Technologies.

Diversification Opportunities for Clean Science and GACM Technologies

0.56

Correlation Coefficient

Clean Science  GACM Technologies

Very weak diversification

The 3 months correlation between Clean and GACM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Clean Science and and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Clean Science 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 Clean Science and are associated (or correlated) with GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Clean Science i.e., Clean Science and GACM Technologies go up and down completely randomly.

Pair Corralation between Clean Science and GACM Technologies

Assuming the 90 days trading horizon Clean Science and is expected to generate 3.07 times more return on investment than GACM Technologies. However, Clean Science is 3.07 times more volatile than GACM Technologies Limited. It trades about 0.29 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.18 per unit of risk. If you would invest  128,895  in Clean Science and on October 8, 2024 and sell it today you would earn a total of  20,735  from holding Clean Science and or generate 16.09% return on investment over 90 days.

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

Clean Science and  vs.  GACM Technologies Limited

Clean Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Clean Science is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

GACM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GACM Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Clean Science and GACM Technologies

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

The idea behind Clean Science and and GACM Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.