Correlation Between Fiberweb and GACM Technologies

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

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

Diversification Opportunities for Fiberweb and GACM Technologies

0.1

Correlation Coefficient

Fiberweb  GACM Technologies

Average diversification

The 3 months correlation between Fiberweb and GACM is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fiberweb Limited and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Fiberweb 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 Fiberweb Limited 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 Fiberweb i.e., Fiberweb and GACM Technologies go up and down completely randomly.

Pair Corralation between Fiberweb and GACM Technologies

Assuming the 90 days trading horizon Fiberweb Limited is expected to under-perform the GACM Technologies. In addition to that, Fiberweb is 2.05 times more volatile than GACM Technologies Limited. It trades about -0.29 of its total potential returns per unit of risk. GACM Technologies Limited is currently generating about 0.01 per unit of volatility. If you would invest  97.00  in GACM Technologies Limited on October 17, 2024 and sell it today you would earn a total of  0.00  from holding GACM Technologies Limited or generate 0.0% return on investment over 90 days.

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

Fiberweb Limited  vs.  GACM Technologies Limited

Fiberweb Limited

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberweb Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fiberweb exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 rather sound fundamental indicators, GACM Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fiberweb and GACM Technologies

The main advantage of trading using opposite Fiberweb and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiberweb 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 Fiberweb Limited 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.