Correlation Between GACM Technologies and Generic Engineering

Can any of the company-specific risk be diversified away by investing in both GACM Technologies and Generic Engineering 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 Generic Engineering 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 Generic Engineering Construction, you can compare the effects of market volatilities on GACM Technologies and Generic Engineering 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 Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of GACM Technologies and Generic Engineering.

Diversification Opportunities for GACM Technologies and Generic Engineering

0.5

Correlation Coefficient

GACM Technologies  Generic Engineering

Very weak diversification

The 3 months correlation between GACM and Generic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering 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 Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of GACM Technologies i.e., GACM Technologies and Generic Engineering go up and down completely randomly.

Pair Corralation between GACM Technologies and Generic Engineering

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Generic Engineering. But the stock apears to be less risky and, when comparing its historical volatility, GACM Technologies Limited is 4.03 times less risky than Generic Engineering. The stock trades about -0.3 of its potential returns per unit of risk. The Generic Engineering Construction is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,290  in Generic Engineering Construction on October 6, 2024 and sell it today you would lose (17.00) from holding Generic Engineering Construction or give up 0.4% of portfolio value over 90 days.

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

GACM Technologies Limited  vs.  Generic Engineering Constructi

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Generic Engineering

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GACM Technologies and Generic Engineering

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

The idea behind GACM Technologies Limited and Generic Engineering Construction 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.