Correlation Between GM Breweries and IG Petrochemicals

Can any of the company-specific risk be diversified away by investing in both GM Breweries and IG Petrochemicals 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 GM Breweries and IG Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GM Breweries Limited and IG Petrochemicals Limited, you can compare the effects of market volatilities on GM Breweries and IG Petrochemicals 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 GM Breweries with a short position of IG Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and IG Petrochemicals.

Diversification Opportunities for GM Breweries and IG Petrochemicals

0.9

Correlation Coefficient

GM Breweries  IG Petrochemicals

Almost no diversification

The 3 months correlation between GMBREW and IGPL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and GM Breweries 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 GM Breweries Limited are associated (or correlated) with IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of GM Breweries i.e., GM Breweries and IG Petrochemicals go up and down completely randomly.

Pair Corralation between GM Breweries and IG Petrochemicals

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the IG Petrochemicals. In addition to that, GM Breweries is 1.0 times more volatile than IG Petrochemicals Limited. It trades about -0.14 of its total potential returns per unit of risk. IG Petrochemicals Limited is currently generating about -0.13 per unit of volatility. If you would invest  55,990  in IG Petrochemicals Limited on December 24, 2024 and sell it today you would lose (11,590) from holding IG Petrochemicals Limited or give up 20.7% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  IG Petrochemicals Limited

GM Breweries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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.

IG Petrochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GM Breweries and IG Petrochemicals

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

The idea behind GM Breweries Limited and IG Petrochemicals 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.