Correlation Between GM Breweries and Rossari Biotech

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

Diversification Opportunities for GM Breweries and Rossari Biotech

0.87

Correlation Coefficient

GM Breweries  Rossari Biotech

Very poor diversification

The 3 months correlation between GMBREW and Rossari is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Rossari Biotech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rossari Biotech 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 Rossari Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rossari Biotech has no effect on the direction of GM Breweries i.e., GM Breweries and Rossari Biotech go up and down completely randomly.

Pair Corralation between GM Breweries and Rossari Biotech

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 0.97 times more return on investment than Rossari Biotech. However, GM Breweries Limited is 1.03 times less risky than Rossari Biotech. It trades about 0.01 of its potential returns per unit of risk. Rossari Biotech Limited is currently generating about -0.1 per unit of risk. If you would invest  80,345  in GM Breweries Limited on September 28, 2024 and sell it today you would earn a total of  5.00  from holding GM Breweries Limited or generate 0.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

GM Breweries Limited  vs.  Rossari Biotech Limited

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rossari Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rossari Biotech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with GM Breweries and Rossari Biotech

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

The idea behind GM Breweries Limited and Rossari Biotech 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.