Correlation Between Garware Hi and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Garware Hi 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 Garware Hi and GACM Technologies 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 GACM Technologies Limited, you can compare the effects of market volatilities on Garware Hi 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 Garware Hi with a short position of GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garware Hi and GACM Technologies.

Diversification Opportunities for Garware Hi and GACM Technologies

-0.49

Correlation Coefficient

Garware Hi  GACM Technologies

Very good diversification

The 3 months correlation between Garware and GACM is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Garware Hi 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 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 Garware Hi i.e., Garware Hi and GACM Technologies go up and down completely randomly.

Pair Corralation between Garware Hi and GACM Technologies

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.17 times more return on investment than GACM Technologies. However, Garware Hi is 1.17 times more volatile than GACM Technologies Limited. It trades about 0.23 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.08 per unit of risk. If you would invest  324,910  in Garware Hi Tech Films on September 20, 2024 and sell it today you would earn a total of  195,760  from holding Garware Hi Tech Films or generate 60.25% return on investment over 90 days.

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

Garware Hi Tech Films  vs.  GACM Technologies Limited

Garware Hi Tech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Garware Hi and GACM Technologies

The main advantage of trading using opposite Garware Hi and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garware Hi 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 Garware Hi Tech Films 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.