Correlation Between GM Breweries and Ravi Kumar

Can any of the company-specific risk be diversified away by investing in both GM Breweries and Ravi Kumar 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 Ravi Kumar 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 Ravi Kumar Distilleries, you can compare the effects of market volatilities on GM Breweries and Ravi Kumar 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 Ravi Kumar. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Ravi Kumar.

Diversification Opportunities for GM Breweries and Ravi Kumar

0.86

Correlation Coefficient

GM Breweries  Ravi Kumar

Very poor diversification

The 3 months correlation between GMBREW and Ravi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Ravi Kumar Distilleries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ravi Kumar Distilleries 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 Ravi Kumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ravi Kumar Distilleries has no effect on the direction of GM Breweries i.e., GM Breweries and Ravi Kumar go up and down completely randomly.

Pair Corralation between GM Breweries and Ravi Kumar

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Ravi Kumar. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.09 times less risky than Ravi Kumar. The stock trades about -0.13 of its potential returns per unit of risk. The Ravi Kumar Distilleries is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,940  in Ravi Kumar Distilleries on December 23, 2024 and sell it today you would lose (365.00) from holding Ravi Kumar Distilleries or give up 12.41% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Ravi Kumar Distilleries

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 uncertain 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.

Ravi Kumar Distilleries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ravi Kumar Distilleries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM Breweries and Ravi Kumar

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

The idea behind GM Breweries Limited and Ravi Kumar Distilleries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.