Correlation Between GM Breweries and Silver Touch

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

Diversification Opportunities for GM Breweries and Silver Touch

0.24

Correlation Coefficient

GM Breweries  Silver Touch

Modest diversification

The 3 months correlation between GMBREW and Silver is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Silver Touch Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Touch Technologies 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 Silver Touch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Touch Technologies has no effect on the direction of GM Breweries i.e., GM Breweries and Silver Touch go up and down completely randomly.

Pair Corralation between GM Breweries and Silver Touch

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Silver Touch. In addition to that, GM Breweries is 1.3 times more volatile than Silver Touch Technologies. It trades about -0.06 of its total potential returns per unit of risk. Silver Touch Technologies is currently generating about -0.05 per unit of volatility. If you would invest  71,880  in Silver Touch Technologies on October 27, 2024 and sell it today you would lose (3,735) from holding Silver Touch Technologies or give up 5.2% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Silver Touch Technologies

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Silver Touch Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silver Touch Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Silver Touch is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM Breweries and Silver Touch

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

The idea behind GM Breweries Limited and Silver Touch Technologies 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.