Correlation Between GM Breweries and UFO Moviez

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

Diversification Opportunities for GM Breweries and UFO Moviez

0.85

Correlation Coefficient

GM Breweries  UFO Moviez

Very poor diversification

The 3 months correlation between GMBREW and UFO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and UFO Moviez India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFO Moviez 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 UFO Moviez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFO Moviez India has no effect on the direction of GM Breweries i.e., GM Breweries and UFO Moviez go up and down completely randomly.

Pair Corralation between GM Breweries and UFO Moviez

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 1.18 times more return on investment than UFO Moviez. However, GM Breweries is 1.18 times more volatile than UFO Moviez India. It trades about -0.03 of its potential returns per unit of risk. UFO Moviez India is currently generating about -0.11 per unit of risk. If you would invest  90,200  in GM Breweries Limited on September 12, 2024 and sell it today you would lose (6,835) from holding GM Breweries Limited or give up 7.58% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  UFO Moviez 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 latest stock price disturbance, may contribute to short-term losses for the investors.

UFO Moviez India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UFO Moviez India 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GM Breweries and UFO Moviez

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

The idea behind GM Breweries Limited and UFO Moviez 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..