Correlation Between GPT Healthcare and Investment Trust

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

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

Diversification Opportunities for GPT Healthcare and Investment Trust

-0.6

Correlation Coefficient

GPT Healthcare  Investment Trust

Excellent diversification

The 3 months correlation between GPT and Investment is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 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 GPT Healthcare i.e., GPT Healthcare and Investment Trust go up and down completely randomly.

Pair Corralation between GPT Healthcare and Investment Trust

Assuming the 90 days trading horizon GPT Healthcare is expected to under-perform the Investment Trust. But the stock apears to be less risky and, when comparing its historical volatility, GPT Healthcare is 1.24 times less risky than Investment Trust. The stock trades about -0.01 of its potential returns per unit of risk. The The Investment Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18,501  in The Investment Trust on September 2, 2024 and sell it today you would earn a total of  1,733  from holding The Investment Trust or generate 9.37% return on investment over 90 days.

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

GPT Healthcare  vs.  The Investment Trust

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Investment Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GPT Healthcare and Investment Trust

The main advantage of trading using opposite GPT Healthcare and Investment Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT Healthcare 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 GPT Healthcare 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.