Correlation Between GM Breweries and STEEL EXCHANGE

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

Diversification Opportunities for GM Breweries and STEEL EXCHANGE

0.75

Correlation Coefficient

GM Breweries  STEEL EXCHANGE

Poor diversification

The 3 months correlation between GMBREW and STEEL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and STEEL EXCHANGE INDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL EXCHANGE INDIA 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 STEEL EXCHANGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL EXCHANGE INDIA has no effect on the direction of GM Breweries i.e., GM Breweries and STEEL EXCHANGE go up and down completely randomly.

Pair Corralation between GM Breweries and STEEL EXCHANGE

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 1.42 times more return on investment than STEEL EXCHANGE. However, GM Breweries is 1.42 times more volatile than STEEL EXCHANGE INDIA. It trades about 0.0 of its potential returns per unit of risk. STEEL EXCHANGE INDIA is currently generating about -0.17 per unit of risk. If you would invest  85,560  in GM Breweries Limited on September 4, 2024 and sell it today you would lose (2,995) from holding GM Breweries Limited or give up 3.5% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  STEEL EXCHANGE INDIA

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.

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA 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 forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with GM Breweries and STEEL EXCHANGE

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

The idea behind GM Breweries Limited and STEEL EXCHANGE INDIA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.