Correlation Between Gamma Communications and Intermediate Capital

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

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

Diversification Opportunities for Gamma Communications and Intermediate Capital

0.62

Correlation Coefficient

Gamma Communications  Intermediate Capital

Poor diversification

The 3 months correlation between Gamma and Intermediate is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Gamma Communications i.e., Gamma Communications and Intermediate Capital go up and down completely randomly.

Pair Corralation between Gamma Communications and Intermediate Capital

Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 1.0 times more return on investment than Intermediate Capital. However, Gamma Communications is 1.0 times more volatile than Intermediate Capital Group. It trades about 0.03 of its potential returns per unit of risk. Intermediate Capital Group is currently generating about 0.0 per unit of risk. If you would invest  152,616  in Gamma Communications PLC on August 30, 2024 and sell it today you would earn a total of  4,984  from holding Gamma Communications PLC or generate 3.27% return on investment over 90 days.

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

Gamma Communications PLC  vs.  Intermediate Capital Group

Gamma Communications PLC

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gamma Communications PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gamma Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Intermediate Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gamma Communications and Intermediate Capital

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

The idea behind Gamma Communications PLC and Intermediate Capital Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.