Correlation Between GACM Technologies and Chalet Hotels

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

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

Diversification Opportunities for GACM Technologies and Chalet Hotels

0.16

Correlation Coefficient

GACM Technologies  Chalet Hotels

Average diversification

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

Pair Corralation between GACM Technologies and Chalet Hotels

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Chalet Hotels. In addition to that, GACM Technologies is 1.17 times more volatile than Chalet Hotels Limited. It trades about -0.06 of its total potential returns per unit of risk. Chalet Hotels Limited is currently generating about -0.07 per unit of volatility. If you would invest  91,485  in Chalet Hotels Limited on October 24, 2024 and sell it today you would lose (13,000) from holding Chalet Hotels Limited or give up 14.21% of portfolio value over 90 days.

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

GACM Technologies Limited  vs.  Chalet Hotels Limited

GACM Technologies

Risk-Adjusted Performance

7 of 100

OK

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

Chalet Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chalet Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Chalet Hotels is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GACM Technologies and Chalet Hotels

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

The idea behind GACM Technologies Limited and Chalet Hotels 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.