Correlation Between Gamatronic Electronic and RSL Electronics

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

By analyzing existing cross correlation between Gamatronic Electronic Industries and RSL Electronics, you can compare the effects of market volatilities on Gamatronic Electronic and RSL Electronics 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 Gamatronic Electronic with a short position of RSL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamatronic Electronic and RSL Electronics.

Diversification Opportunities for Gamatronic Electronic and RSL Electronics

0.38

Correlation Coefficient

Gamatronic Electronic  RSL Electronics

Weak diversification

The 3 months correlation between Gamatronic and RSL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Gamatronic Electronic Industri and RSL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSL Electronics and Gamatronic Electronic 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 Gamatronic Electronic Industries are associated (or correlated) with RSL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSL Electronics has no effect on the direction of Gamatronic Electronic i.e., Gamatronic Electronic and RSL Electronics go up and down completely randomly.

Pair Corralation between Gamatronic Electronic and RSL Electronics

Assuming the 90 days trading horizon Gamatronic Electronic Industries is expected to generate 3.16 times more return on investment than RSL Electronics. However, Gamatronic Electronic is 3.16 times more volatile than RSL Electronics. It trades about 0.09 of its potential returns per unit of risk. RSL Electronics is currently generating about 0.18 per unit of risk. If you would invest  106,500  in Gamatronic Electronic Industries on September 12, 2024 and sell it today you would earn a total of  24,600  from holding Gamatronic Electronic Industries or generate 23.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.83%
Values	Daily Returns

Gamatronic Electronic Industri  vs.  RSL Electronics

Gamatronic Electronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gamatronic Electronic Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gamatronic Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

RSL Electronics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RSL Electronics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RSL Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gamatronic Electronic and RSL Electronics

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

The idea behind Gamatronic Electronic Industries and RSL Electronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.