Correlation Between DISTRICT METALS and Gamma Communications

Can any of the company-specific risk be diversified away by investing in both DISTRICT METALS and Gamma Communications 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 DISTRICT METALS and Gamma Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DISTRICT METALS and Gamma Communications plc, you can compare the effects of market volatilities on DISTRICT METALS and Gamma Communications 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 DISTRICT METALS with a short position of Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of DISTRICT METALS and Gamma Communications.

Diversification Opportunities for DISTRICT METALS and Gamma Communications

-0.16

Correlation Coefficient

DISTRICT METALS  Gamma Communications

Good diversification

The 3 months correlation between DISTRICT and Gamma is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding DISTRICT METALS and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc and DISTRICT METALS 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 DISTRICT METALS are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of DISTRICT METALS i.e., DISTRICT METALS and Gamma Communications go up and down completely randomly.

Pair Corralation between DISTRICT METALS and Gamma Communications

Assuming the 90 days trading horizon DISTRICT METALS is expected to generate 3.46 times more return on investment than Gamma Communications. However, DISTRICT METALS is 3.46 times more volatile than Gamma Communications plc. It trades about 0.13 of its potential returns per unit of risk. Gamma Communications plc is currently generating about -0.01 per unit of risk. If you would invest  17.00  in DISTRICT METALS on September 17, 2024 and sell it today you would earn a total of  7.00  from holding DISTRICT METALS or generate 41.18% return on investment over 90 days.

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

DISTRICT METALS  vs.  Gamma Communications plc

DISTRICT METALS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DISTRICT METALS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DISTRICT METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gamma Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DISTRICT METALS and Gamma Communications

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

The idea behind DISTRICT METALS and Gamma Communications plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.