Correlation Between GACM Technologies and Hindustan Construction

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

Diversification Opportunities for GACM Technologies and Hindustan Construction

0.41

Correlation Coefficient

GACM Technologies  Hindustan Construction

Very weak diversification

The 3 months correlation between GACM and Hindustan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Hindustan Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Construction 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 Hindustan Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Construction has no effect on the direction of GACM Technologies i.e., GACM Technologies and Hindustan Construction go up and down completely randomly.

Pair Corralation between GACM Technologies and Hindustan Construction

Assuming the 90 days trading horizon GACM Technologies Limited is expected to generate 0.71 times more return on investment than Hindustan Construction. However, GACM Technologies Limited is 1.41 times less risky than Hindustan Construction. It trades about 0.09 of its potential returns per unit of risk. Hindustan Construction is currently generating about -0.03 per unit of risk. If you would invest  87.00  in GACM Technologies Limited on October 24, 2024 and sell it today you would earn a total of  11.00  from holding GACM Technologies Limited or generate 12.64% return on investment over 90 days.

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

GACM Technologies Limited  vs.  Hindustan Construction

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.

Hindustan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GACM Technologies and Hindustan Construction

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

The idea behind GACM Technologies Limited and Hindustan 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.