Correlation Between GTL and VIP Clothing

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

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

Diversification Opportunities for GTL and VIP Clothing

0.87

Correlation Coefficient

GTL  VIP Clothing

Very poor diversification

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

Pair Corralation between GTL and VIP Clothing

Assuming the 90 days trading horizon GTL Limited is expected to under-perform the VIP Clothing. But the stock apears to be less risky and, when comparing its historical volatility, GTL Limited is 1.19 times less risky than VIP Clothing. The stock trades about -0.13 of its potential returns per unit of risk. The VIP Clothing Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,279  in VIP Clothing Limited on November 20, 2024 and sell it today you would lose (652.00) from holding VIP Clothing Limited or give up 15.24% of portfolio value over 90 days.

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

GTL Limited  vs.  VIP Clothing 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 unfluctuating 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.

VIP Clothing Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIP Clothing 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 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 VIP Clothing

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

The idea behind GTL Limited and VIP Clothing 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.