Correlation Between GM Breweries and Investment Trust

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

Diversification Opportunities for GM Breweries and Investment Trust

0.96

Correlation Coefficient

GM Breweries  Investment Trust

Almost no diversification

The 3 months correlation between GMBREW and Investment is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of GM Breweries i.e., GM Breweries and Investment Trust go up and down completely randomly.

Pair Corralation between GM Breweries and Investment Trust

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 0.99 times more return on investment than Investment Trust. However, GM Breweries Limited is 1.01 times less risky than Investment Trust. It trades about -0.15 of its potential returns per unit of risk. The Investment Trust is currently generating about -0.23 per unit of risk. If you would invest  82,610  in GM Breweries Limited on December 6, 2024 and sell it today you would lose (19,315) from holding GM Breweries Limited or give up 23.38% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  The Investment Trust

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 unsteady 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.

Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GM Breweries and Investment Trust

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

The idea behind GM Breweries Limited and The Investment Trust 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.