Correlation Between GM Breweries and S P

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

Diversification Opportunities for GM Breweries and S P

0.64

Correlation Coefficient

GM Breweries  S P

Poor diversification

The 3 months correlation between GMBREW and SPAL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of GM Breweries i.e., GM Breweries and S P go up and down completely randomly.

Pair Corralation between GM Breweries and S P

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the S P. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.17 times less risky than S P. The stock trades about 0.0 of its potential returns per unit of risk. The S P Apparels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  90,275  in S P Apparels on September 5, 2024 and sell it today you would earn a total of  4,435  from holding S P Apparels or generate 4.91% return on investment over 90 days.

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

GM Breweries Limited  vs.  S P Apparels

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 somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

S P Apparels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, S P may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM Breweries and S P

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

The idea behind GM Breweries Limited and S P Apparels 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.