Correlation Between GTL and UFLEX

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

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

Diversification Opportunities for GTL and UFLEX

0.48

Correlation Coefficient

GTL  UFLEX

Very weak diversification

The 3 months correlation between GTL and UFLEX is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and UFLEX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFLEX Limited 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 UFLEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFLEX Limited has no effect on the direction of GTL i.e., GTL and UFLEX go up and down completely randomly.

Pair Corralation between GTL and UFLEX

Assuming the 90 days trading horizon GTL Limited is expected to under-perform the UFLEX. In addition to that, GTL is 1.41 times more volatile than UFLEX Limited. It trades about -0.21 of its total potential returns per unit of risk. UFLEX Limited is currently generating about -0.02 per unit of volatility. If you would invest  51,680  in UFLEX Limited on December 30, 2024 and sell it today you would lose (1,945) from holding UFLEX Limited or give up 3.76% of portfolio value over 90 days.

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

GTL Limited  vs.  UFLEX 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

UFLEX Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days UFLEX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, UFLEX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GTL and UFLEX

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

The idea behind GTL Limited and UFLEX 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.