Correlation Between GTL and NRB Industrial

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

By analyzing existing cross correlation between GTL Limited and NRB Industrial Bearings, you can compare the effects of market volatilities on GTL and NRB Industrial 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 NRB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GTL and NRB Industrial.

Diversification Opportunities for GTL and NRB Industrial

0.74

Correlation Coefficient

GTL  NRB Industrial

Poor diversification

The 3 months correlation between GTL and NRB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and NRB Industrial Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRB Industrial Bearings 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 NRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRB Industrial Bearings has no effect on the direction of GTL i.e., GTL and NRB Industrial go up and down completely randomly.

Pair Corralation between GTL and NRB Industrial

Assuming the 90 days trading horizon GTL Limited is expected to under-perform the NRB Industrial. In addition to that, GTL is 1.3 times more volatile than NRB Industrial Bearings. It trades about -0.2 of its total potential returns per unit of risk. NRB Industrial Bearings is currently generating about -0.13 per unit of volatility. If you would invest  2,757  in NRB Industrial Bearings on November 29, 2024 and sell it today you would lose (449.00) from holding NRB Industrial Bearings or give up 16.29% 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.  NRB Industrial Bearings

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 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NRB Industrial Bearings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRB Industrial Bearings 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 basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GTL and NRB Industrial

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

The idea behind GTL Limited and NRB Industrial Bearings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.