Correlation Between Indo Rama and GACM Technologies

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

By analyzing existing cross correlation between Indo Rama Synthetics and GACM Technologies Limited, you can compare the effects of market volatilities on Indo Rama and GACM Technologies 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 Indo Rama with a short position of GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Rama and GACM Technologies.

Diversification Opportunities for Indo Rama and GACM Technologies

0.75

Correlation Coefficient

Indo Rama  GACM Technologies

Poor diversification

The 3 months correlation between Indo and GACM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Indo Rama Synthetics and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Indo Rama 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 Indo Rama Synthetics are associated (or correlated) with GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Indo Rama i.e., Indo Rama and GACM Technologies go up and down completely randomly.

Pair Corralation between Indo Rama and GACM Technologies

Assuming the 90 days trading horizon Indo Rama Synthetics is expected to generate 1.74 times more return on investment than GACM Technologies. However, Indo Rama is 1.74 times more volatile than GACM Technologies Limited. It trades about -0.1 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.39 per unit of risk. If you would invest  4,230  in Indo Rama Synthetics on October 4, 2024 and sell it today you would lose (181.00) from holding Indo Rama Synthetics or give up 4.28% of portfolio value over 90 days.

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

Indo Rama Synthetics  vs.  GACM Technologies Limited

Indo Rama Synthetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Rama Synthetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

GACM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GACM Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Indo Rama and GACM Technologies

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

The idea behind Indo Rama Synthetics and GACM Technologies 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.