Correlation Between Garware Hi-Tech and Cambridge Technology

Can any of the company-specific risk be diversified away by investing in both Garware Hi-Tech and Cambridge Technology 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 Garware Hi-Tech and Cambridge Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garware Hi Tech Films and Cambridge Technology Enterprises, you can compare the effects of market volatilities on Garware Hi-Tech and Cambridge Technology 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 Garware Hi-Tech with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garware Hi-Tech and Cambridge Technology.

Diversification Opportunities for Garware Hi-Tech and Cambridge Technology

0.77

Correlation Coefficient

Garware Hi-Tech  Cambridge Technology

Poor diversification

The 3 months correlation between Garware and Cambridge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology and Garware Hi-Tech 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 Garware Hi Tech Films are associated (or correlated) with Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of Garware Hi-Tech i.e., Garware Hi-Tech and Cambridge Technology go up and down completely randomly.

Pair Corralation between Garware Hi-Tech and Cambridge Technology

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.15 times more return on investment than Cambridge Technology. However, Garware Hi-Tech is 1.15 times more volatile than Cambridge Technology Enterprises. It trades about -0.09 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about -0.15 per unit of risk. If you would invest  514,050  in Garware Hi Tech Films on December 2, 2024 and sell it today you would lose (136,970) from holding Garware Hi Tech Films or give up 26.65% of portfolio value over 90 days.

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

Garware Hi Tech Films  vs.  Cambridge Technology Enterpris

Garware Hi Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garware Hi Tech Films has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cambridge Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Garware Hi-Tech and Cambridge Technology

The main advantage of trading using opposite Garware Hi-Tech and Cambridge Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garware Hi-Tech position performs unexpectedly, Cambridge Technology 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 Cambridge Technology will offset losses from the drop in Cambridge Technology's long position.

The idea behind Garware Hi Tech Films and Cambridge Technology Enterprises 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.