Correlation Between DCM Financial and GACM Technologies

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

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

Diversification Opportunities for DCM Financial and GACM Technologies

0.56

Correlation Coefficient

DCM Financial  GACM Technologies

Very weak diversification

The 3 months correlation between DCM and GACM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DCM Financial Services and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and DCM Financial 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 DCM Financial Services 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 DCM Financial i.e., DCM Financial and GACM Technologies go up and down completely randomly.

Pair Corralation between DCM Financial and GACM Technologies

Assuming the 90 days trading horizon DCM Financial Services is expected to generate 1.48 times more return on investment than GACM Technologies. However, DCM Financial is 1.48 times more volatile than GACM Technologies Limited. It trades about 0.31 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about 0.3 per unit of risk. If you would invest  683.00  in DCM Financial Services on September 24, 2024 and sell it today you would earn a total of  139.00  from holding DCM Financial Services or generate 20.35% return on investment over 90 days.

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

DCM Financial Services  vs.  GACM Technologies Limited

DCM Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCM Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, DCM Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with DCM Financial and GACM Technologies

The main advantage of trading using opposite DCM Financial and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCM Financial 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 DCM Financial Services 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.