Correlation Between GM Breweries and Tera Software

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

Diversification Opportunities for GM Breweries and Tera Software

0.14

Correlation Coefficient

GM Breweries  Tera Software

Average diversification

The 3 months correlation between GMBREW and Tera is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Tera Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tera Software Limited 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 Tera Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tera Software Limited has no effect on the direction of GM Breweries i.e., GM Breweries and Tera Software go up and down completely randomly.

Pair Corralation between GM Breweries and Tera Software

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Tera Software. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.21 times less risky than Tera Software. The stock trades about -0.12 of its potential returns per unit of risk. The Tera Software Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  19,260  in Tera Software Limited on December 25, 2024 and sell it today you would lose (137.00) from holding Tera Software Limited or give up 0.71% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Tera Software Limited

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 weak 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.

Tera Software Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tera Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tera Software is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GM Breweries and Tera Software

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

The idea behind GM Breweries Limited and Tera Software 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.