Correlation Between Fairchem Organics and GPT Healthcare

Can any of the company-specific risk be diversified away by investing in both Fairchem Organics and GPT Healthcare 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 Fairchem Organics and GPT Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Fairchem Organics and GPT Healthcare

0.24

Correlation Coefficient

Fairchem Organics  GPT Healthcare

Modest diversification

The 3 months correlation between Fairchem and GPT is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fairchem Organics Limited and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare and Fairchem Organics 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 Fairchem Organics Limited are associated (or correlated) with GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of Fairchem Organics i.e., Fairchem Organics and GPT Healthcare go up and down completely randomly.

Pair Corralation between Fairchem Organics and GPT Healthcare

Assuming the 90 days trading horizon Fairchem Organics Limited is expected to generate 2.65 times more return on investment than GPT Healthcare. However, Fairchem Organics is 2.65 times more volatile than GPT Healthcare. It trades about 0.03 of its potential returns per unit of risk. GPT Healthcare is currently generating about 0.07 per unit of risk. If you would invest  112,280  in Fairchem Organics Limited on October 5, 2024 and sell it today you would earn a total of  4,025  from holding Fairchem Organics Limited or generate 3.58% return on investment over 90 days.

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

Fairchem Organics Limited  vs.  GPT Healthcare

Fairchem Organics

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fairchem Organics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Fairchem Organics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GPT Healthcare

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, GPT Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fairchem Organics and GPT Healthcare

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

The idea behind Fairchem Organics Limited and GPT Healthcare 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.