Correlation Between GM Breweries and Vibhor Steel

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

Diversification Opportunities for GM Breweries and Vibhor Steel

0.45

Correlation Coefficient

GM Breweries  Vibhor Steel

Very weak diversification

The 3 months correlation between GMBREW and Vibhor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Vibhor Steel Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vibhor Steel Tubes 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 Vibhor Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vibhor Steel Tubes has no effect on the direction of GM Breweries i.e., GM Breweries and Vibhor Steel go up and down completely randomly.

Pair Corralation between GM Breweries and Vibhor Steel

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 0.93 times more return on investment than Vibhor Steel. However, GM Breweries Limited is 1.08 times less risky than Vibhor Steel. It trades about -0.04 of its potential returns per unit of risk. Vibhor Steel Tubes is currently generating about -0.13 per unit of risk. If you would invest  82,980  in GM Breweries Limited on October 4, 2024 and sell it today you would lose (1,725) from holding GM Breweries Limited or give up 2.08% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  Vibhor Steel Tubes

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.

Vibhor Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vibhor Steel Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM Breweries and Vibhor Steel

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

The idea behind GM Breweries Limited and Vibhor Steel Tubes 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 Anywhere module to track or share privately all of your investments from the convenience of any device.