Correlation Between GTL and Compucom Software

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

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

Diversification Opportunities for GTL and Compucom Software

0.76

Correlation Coefficient

GTL  Compucom Software

Poor diversification

The 3 months correlation between GTL and Compucom is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software and GTL 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 GTL Limited are associated (or correlated) with Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of GTL i.e., GTL and Compucom Software go up and down completely randomly.

Pair Corralation between GTL and Compucom Software

Assuming the 90 days trading horizon GTL Limited is expected to generate 1.05 times more return on investment than Compucom Software. However, GTL is 1.05 times more volatile than Compucom Software Limited. It trades about -0.13 of its potential returns per unit of risk. Compucom Software Limited is currently generating about -0.19 per unit of risk. If you would invest  1,206  in GTL Limited on November 20, 2024 and sell it today you would lose (281.00) from holding GTL Limited or give up 23.3% of portfolio value over 90 days.

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

GTL Limited  vs.  Compucom Software Limited

GTL Limited

Risk-Adjusted Performance

Very Weak

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

Compucom Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compucom Software Limited 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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GTL and Compucom Software

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

The idea behind GTL Limited and Compucom Software 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.