Correlation Between Gujarat Lease and Paramount Communications

Can any of the company-specific risk be diversified away by investing in both Gujarat Lease and Paramount Communications 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 Gujarat Lease and Paramount Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gujarat Lease Financing and Paramount Communications Limited, you can compare the effects of market volatilities on Gujarat Lease and Paramount Communications 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 Gujarat Lease with a short position of Paramount Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Lease and Paramount Communications.

Diversification Opportunities for Gujarat Lease and Paramount Communications

-0.18

Correlation Coefficient

Gujarat Lease  Paramount Communications

Good diversification

The 3 months correlation between Gujarat and Paramount is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications and Gujarat Lease 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 Gujarat Lease Financing are associated (or correlated) with Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and Paramount Communications go up and down completely randomly.

Pair Corralation between Gujarat Lease and Paramount Communications

Assuming the 90 days trading horizon Gujarat Lease is expected to generate 1.01 times less return on investment than Paramount Communications. But when comparing it to its historical volatility, Gujarat Lease Financing is 1.09 times less risky than Paramount Communications. It trades about 0.08 of its potential returns per unit of risk. Paramount Communications Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,490  in Paramount Communications Limited on September 20, 2024 and sell it today you would earn a total of  5,060  from holding Paramount Communications Limited or generate 144.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Gujarat Lease Financing  vs.  Paramount Communications Limit

Gujarat Lease Financing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paramount Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gujarat Lease and Paramount Communications

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

The idea behind Gujarat Lease Financing and Paramount Communications 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..