Correlation Between Indian Metals and GM Breweries

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Can any of the company-specific risk be diversified away by investing in both Indian Metals and GM Breweries 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 Indian Metals and GM Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Metals Ferro and GM Breweries Limited, you can compare the effects of market volatilities on Indian Metals and GM Breweries 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 Indian Metals with a short position of GM Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and GM Breweries.

Diversification Opportunities for Indian Metals and GM Breweries

IndianGMBREWDiversified AwayIndianGMBREWDiversified Away100%
0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Indian and GMBREW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries Limited and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of Indian Metals i.e., Indian Metals and GM Breweries go up and down completely randomly.

Pair Corralation between Indian Metals and GM Breweries

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.3 times more return on investment than GM Breweries. However, Indian Metals is 1.3 times more volatile than GM Breweries Limited. It trades about 0.18 of its potential returns per unit of risk. GM Breweries Limited is currently generating about -0.05 per unit of risk. If you would invest  67,164  in Indian Metals Ferro on October 21, 2024 and sell it today you would earn a total of  22,526  from holding Indian Metals Ferro or generate 33.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Indian Metals Ferro  vs.  GM Breweries Limited

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10010203040
JavaScript chart by amCharts 3.21.15IMFA GMBREW
       Timeline  
Indian Metals Ferro 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan6507007508008509009501,000
GM Breweries Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan700750800850

Indian Metals and GM Breweries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.49-6.36-4.23-2.10.02.254.546.849.13 0.020.040.060.08
JavaScript chart by amCharts 3.21.15IMFA GMBREW
       Returns  

Pair Trading with Indian Metals and GM Breweries

The main advantage of trading using opposite Indian Metals and GM Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, GM Breweries 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 GM Breweries will offset losses from the drop in GM Breweries' long position.
The idea behind Indian Metals Ferro and GM Breweries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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