Correlation Between GACM Technologies and Modi Rubber

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

Diversification Opportunities for GACM Technologies and Modi Rubber

0.55

Correlation Coefficient

GACM Technologies  Modi Rubber

Very weak diversification

The 3 months correlation between GACM and Modi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of GACM Technologies i.e., GACM Technologies and Modi Rubber go up and down completely randomly.

Pair Corralation between GACM Technologies and Modi Rubber

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Modi Rubber. In addition to that, GACM Technologies is 1.48 times more volatile than Modi Rubber Limited. It trades about -0.27 of its total potential returns per unit of risk. Modi Rubber Limited is currently generating about 0.03 per unit of volatility. If you would invest  12,717  in Modi Rubber Limited on September 4, 2024 and sell it today you would earn a total of  273.00  from holding Modi Rubber Limited or generate 2.15% 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.  Modi Rubber 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 unfluctuating 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.

Modi Rubber Limited

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modi Rubber Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GACM Technologies and Modi Rubber

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

The idea behind GACM Technologies Limited and Modi Rubber 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.