Correlation Between City Union and GACM Technologies

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

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

Diversification Opportunities for City Union and GACM Technologies

-0.29

Correlation Coefficient

City Union  GACM Technologies

Very good diversification

The 3 months correlation between City and GACM is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and City Union 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 City Union Bank 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 City Union i.e., City Union and GACM Technologies go up and down completely randomly.

Pair Corralation between City Union and GACM Technologies

Assuming the 90 days trading horizon City Union Bank is expected to generate 0.55 times more return on investment than GACM Technologies. However, City Union Bank is 1.8 times less risky than GACM Technologies. It trades about 0.03 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.23 per unit of risk. If you would invest  15,097  in City Union Bank on October 9, 2024 and sell it today you would earn a total of  1,929  from holding City Union Bank or generate 12.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

City Union Bank  vs.  GACM Technologies Limited

City Union Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, City Union may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with City Union and GACM Technologies

The main advantage of trading using opposite City Union and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Union 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 City Union Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.