Correlation Between Garware Hi and Total Transport

Can any of the company-specific risk be diversified away by investing in both Garware Hi and Total Transport 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 Total Transport 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 Total Transport Systems, you can compare the effects of market volatilities on Garware Hi and Total Transport 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 Total Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garware Hi and Total Transport.

Diversification Opportunities for Garware Hi and Total Transport

-0.61

Correlation Coefficient

Garware Hi  Total Transport

Excellent diversification

The 3 months correlation between Garware and Total is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Total Transport Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Transport Systems 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 Total Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Transport Systems has no effect on the direction of Garware Hi i.e., Garware Hi and Total Transport go up and down completely randomly.

Pair Corralation between Garware Hi and Total Transport

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.94 times more return on investment than Total Transport. However, Garware Hi is 1.94 times more volatile than Total Transport Systems. It trades about 0.2 of its potential returns per unit of risk. Total Transport Systems is currently generating about -0.22 per unit of risk. If you would invest  335,674  in Garware Hi Tech Films on September 4, 2024 and sell it today you would earn a total of  178,376  from holding Garware Hi Tech Films or generate 53.14% return on investment over 90 days.

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

Garware Hi Tech Films  vs.  Total Transport Systems

Garware Hi Tech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems 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 basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Garware Hi and Total Transport

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

The idea behind Garware Hi Tech Films and Total Transport Systems 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.