Correlation Between GACM Technologies and Iris Clothings

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

Diversification Opportunities for GACM Technologies and Iris Clothings

0.81

Correlation Coefficient

GACM Technologies  Iris Clothings

Very poor diversification

The 3 months correlation between GACM and Iris is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Iris Clothings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Clothings 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 Iris Clothings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Clothings has no effect on the direction of GACM Technologies i.e., GACM Technologies and Iris Clothings go up and down completely randomly.

Pair Corralation between GACM Technologies and Iris Clothings

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Iris Clothings. In addition to that, GACM Technologies is 1.72 times more volatile than Iris Clothings Limited. It trades about -0.15 of its total potential returns per unit of risk. Iris Clothings Limited is currently generating about -0.09 per unit of volatility. If you would invest  7,563  in Iris Clothings Limited on September 12, 2024 and sell it today you would lose (888.00) from holding Iris Clothings Limited or give up 11.74% of portfolio value over 90 days.

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

GACM Technologies Limited  vs.  Iris Clothings Limited

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Clothings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GACM Technologies and Iris Clothings

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

The idea behind GACM Technologies Limited and Iris Clothings 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.