Correlation Between GACM Technologies and Thermax

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

Diversification Opportunities for GACM Technologies and Thermax

0.14

Correlation Coefficient

GACM Technologies  Thermax

Average diversification

The 3 months correlation between GACM and Thermax is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax 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 Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of GACM Technologies i.e., GACM Technologies and Thermax go up and down completely randomly.

Pair Corralation between GACM Technologies and Thermax

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Thermax. In addition to that, GACM Technologies is 1.44 times more volatile than Thermax Limited. It trades about -0.11 of its total potential returns per unit of risk. Thermax Limited is currently generating about -0.03 per unit of volatility. If you would invest  520,700  in Thermax Limited on September 18, 2024 and sell it today you would lose (30,215) from holding Thermax Limited or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

GACM Technologies Limited  vs.  Thermax 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 abnormal 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.

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GACM Technologies and Thermax

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

The idea behind GACM Technologies Limited and Thermax 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.