Correlation Between GPT Healthcare and Alkali Metals

Can any of the company-specific risk be diversified away by investing in both GPT Healthcare and Alkali Metals 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 GPT Healthcare and Alkali Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for GPT Healthcare and Alkali Metals

0.42

Correlation Coefficient

GPT Healthcare  Alkali Metals

Very weak diversification

The 3 months correlation between GPT and Alkali is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Alkali Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkali Metals Limited and GPT Healthcare 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 GPT Healthcare are associated (or correlated) with Alkali Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkali Metals Limited has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Alkali Metals go up and down completely randomly.

Pair Corralation between GPT Healthcare and Alkali Metals

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 0.88 times more return on investment than Alkali Metals. However, GPT Healthcare is 1.14 times less risky than Alkali Metals. It trades about 0.04 of its potential returns per unit of risk. Alkali Metals Limited is currently generating about -0.03 per unit of risk. If you would invest  17,677  in GPT Healthcare on October 4, 2024 and sell it today you would earn a total of  713.00  from holding GPT Healthcare or generate 4.03% return on investment over 90 days.

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

GPT Healthcare  vs.  Alkali Metals Limited

GPT Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GPT Healthcare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GPT Healthcare and Alkali Metals

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

The idea behind GPT Healthcare and Alkali Metals 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.