Correlation Between Gatron Industries and International Steels

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

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

Diversification Opportunities for Gatron Industries and International Steels

-0.45

Correlation Coefficient

Gatron Industries  International Steels

Very good diversification

The 3 months correlation between Gatron and International is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gatron Industries and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Steels 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Gatron Industries i.e., Gatron Industries and International Steels go up and down completely randomly.

Pair Corralation between Gatron Industries and International Steels

Assuming the 90 days trading horizon Gatron Industries is expected to under-perform the International Steels. But the stock apears to be less risky and, when comparing its historical volatility, Gatron Industries is 3.25 times less risky than International Steels. The stock trades about -0.11 of its potential returns per unit of risk. The International Steels is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,464  in International Steels on October 11, 2024 and sell it today you would earn a total of  2,109  from holding International Steels or generate 28.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gatron Industries  vs.  International Steels

Gatron Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gatron Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

International Steels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Steels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, International Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gatron Industries and International Steels

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

The idea behind Gatron Industries and International Steels 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.