Correlation Between Generic Engineering and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Generic Engineering and GACM Technologies 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 Generic Engineering and GACM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Generic Engineering Construction and GACM Technologies Limited, you can compare the effects of market volatilities on Generic Engineering and GACM Technologies 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 Generic Engineering with a short position of GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and GACM Technologies.

Diversification Opportunities for Generic Engineering and GACM Technologies

0.49

Correlation Coefficient

Generic Engineering  GACM Technologies

Very weak diversification

The 3 months correlation between Generic and GACM is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Generic Engineering i.e., Generic Engineering and GACM Technologies go up and down completely randomly.

Pair Corralation between Generic Engineering and GACM Technologies

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 1.21 times more return on investment than GACM Technologies. However, Generic Engineering is 1.21 times more volatile than GACM Technologies Limited. It trades about 0.03 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.04 per unit of risk. If you would invest  4,140  in Generic Engineering Construction on October 7, 2024 and sell it today you would earn a total of  133.00  from holding Generic Engineering Construction or generate 3.21% return on investment over 90 days.

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

Generic Engineering Constructi  vs.  GACM Technologies Limited

Generic Engineering

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 rather sound fundamental indicators, GACM Technologies is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Generic Engineering and GACM Technologies

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

The idea behind Generic Engineering Construction and GACM Technologies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..