Correlation Between Muthoot Finance and GACM Technologies

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

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

Diversification Opportunities for Muthoot Finance and GACM Technologies

0.34

Correlation Coefficient

Muthoot Finance  GACM Technologies

Weak diversification

The 3 months correlation between Muthoot and GACM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Muthoot Finance Limited and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Muthoot Finance 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 Muthoot Finance Limited 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 Muthoot Finance i.e., Muthoot Finance and GACM Technologies go up and down completely randomly.

Pair Corralation between Muthoot Finance and GACM Technologies

Assuming the 90 days trading horizon Muthoot Finance Limited is expected to generate 0.69 times more return on investment than GACM Technologies. However, Muthoot Finance Limited is 1.45 times less risky than GACM Technologies. It trades about 0.27 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about 0.04 per unit of risk. If you would invest  191,195  in Muthoot Finance Limited on September 29, 2024 and sell it today you would earn a total of  15,765  from holding Muthoot Finance Limited or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Muthoot Finance Limited  vs.  GACM Technologies Limited

Muthoot Finance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Muthoot Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 rather sound fundamental indicators, GACM Technologies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Muthoot Finance and GACM Technologies

The main advantage of trading using opposite Muthoot Finance and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Muthoot Finance 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 Muthoot Finance Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.