Correlation Between Golden Tobacco and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Golden Tobacco and GACM Technologies 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 Golden Tobacco and GACM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Golden Tobacco Limited and GACM Technologies Limited, you can compare the effects of market volatilities on Golden Tobacco and GACM Technologies 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 Golden Tobacco with a short position of GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Tobacco and GACM Technologies.

Diversification Opportunities for Golden Tobacco and GACM Technologies

0.59

Correlation Coefficient

Golden Tobacco  GACM Technologies

Very weak diversification

The 3 months correlation between Golden and GACM is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Golden Tobacco Limited and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Golden Tobacco 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 Golden Tobacco Limited are associated (or correlated) with GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Golden Tobacco i.e., Golden Tobacco and GACM Technologies go up and down completely randomly.

Pair Corralation between Golden Tobacco and GACM Technologies

Assuming the 90 days trading horizon Golden Tobacco Limited is expected to generate 3.04 times more return on investment than GACM Technologies. However, Golden Tobacco is 3.04 times more volatile than GACM Technologies Limited. It trades about -0.06 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.2 per unit of risk. If you would invest  4,000  in Golden Tobacco Limited on October 11, 2024 and sell it today you would lose (194.00) from holding Golden Tobacco Limited or give up 4.85% of portfolio value over 90 days.

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

Golden Tobacco Limited  vs.  GACM Technologies Limited

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

GACM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GACM Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Golden Tobacco and GACM Technologies

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

The idea behind Golden Tobacco Limited and GACM Technologies 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.