Correlation Between Gatron Industries and Adamjee Insurance

Can any of the company-specific risk be diversified away by investing in both Gatron Industries and Adamjee Insurance 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 Gatron Industries and Adamjee Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gatron Industries and Adamjee Insurance, you can compare the effects of market volatilities on Gatron Industries and Adamjee Insurance 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 Gatron Industries with a short position of Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatron Industries and Adamjee Insurance.

Diversification Opportunities for Gatron Industries and Adamjee Insurance

-0.12

Correlation Coefficient

Gatron Industries  Adamjee Insurance

Good diversification

The 3 months correlation between Gatron and Adamjee is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gatron Industries and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and Gatron Industries 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 Gatron Industries are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Gatron Industries i.e., Gatron Industries and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Gatron Industries and Adamjee Insurance

Assuming the 90 days trading horizon Gatron Industries is expected to under-perform the Adamjee Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Gatron Industries is 2.01 times less risky than Adamjee Insurance. The stock trades about -0.22 of its potential returns per unit of risk. The Adamjee Insurance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,246  in Adamjee Insurance on December 4, 2024 and sell it today you would earn a total of  627.00  from holding Adamjee Insurance or generate 14.77% return on investment over 90 days.

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

Gatron Industries  vs.  Adamjee Insurance

Gatron Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gatron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Adamjee Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatron Industries and Adamjee Insurance

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

The idea behind Gatron Industries and Adamjee Insurance 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.