Correlation Between GTL and Selan Exploration

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

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

Diversification Opportunities for GTL and Selan Exploration

0.87

Correlation Coefficient

GTL  Selan Exploration

Very poor diversification

The 3 months correlation between GTL and Selan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration 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 Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of GTL i.e., GTL and Selan Exploration go up and down completely randomly.

Pair Corralation between GTL and Selan Exploration

Assuming the 90 days trading horizon GTL is expected to generate 1.09 times less return on investment than Selan Exploration. In addition to that, GTL is 1.16 times more volatile than Selan Exploration Technology. It trades about 0.05 of its total potential returns per unit of risk. Selan Exploration Technology is currently generating about 0.06 per unit of volatility. If you would invest  28,285  in Selan Exploration Technology on November 20, 2024 and sell it today you would earn a total of  27,720  from holding Selan Exploration Technology or generate 98.0% return on investment over 90 days.

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

GTL Limited  vs.  Selan Exploration Technology

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.

Selan Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential 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 Selan Exploration

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

The idea behind GTL Limited and Selan Exploration Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.