Correlation Between GACM Technologies and Indian Hotels

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

Diversification Opportunities for GACM Technologies and Indian Hotels

0.09

Correlation Coefficient

GACM Technologies  Indian Hotels

Significant diversification

The 3 months correlation between GACM and Indian is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels 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 Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of GACM Technologies i.e., GACM Technologies and Indian Hotels go up and down completely randomly.

Pair Corralation between GACM Technologies and Indian Hotels

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Indian Hotels. In addition to that, GACM Technologies is 1.84 times more volatile than The Indian Hotels. It trades about -0.19 of its total potential returns per unit of risk. The Indian Hotels is currently generating about 0.1 per unit of volatility. If you would invest  38,923  in The Indian Hotels on October 24, 2024 and sell it today you would earn a total of  37,112  from holding The Indian Hotels or generate 95.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

GACM Technologies Limited  vs.  The Indian Hotels

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.

Indian Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GACM Technologies and Indian Hotels

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

The idea behind GACM Technologies Limited and The Indian Hotels 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.