Correlation Between Prakash Steelage and GACM Technologies

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

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

Diversification Opportunities for Prakash Steelage and GACM Technologies

0.61

Correlation Coefficient

Prakash Steelage  GACM Technologies

Poor diversification

The 3 months correlation between Prakash and GACM is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage 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 Prakash Steelage 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 Prakash Steelage 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 Prakash Steelage i.e., Prakash Steelage and GACM Technologies go up and down completely randomly.

Pair Corralation between Prakash Steelage and GACM Technologies

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the GACM Technologies. In addition to that, Prakash Steelage is 1.61 times more volatile than GACM Technologies Limited. It trades about -0.39 of its total potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.2 per unit of volatility. If you would invest  95.00  in GACM Technologies Limited on October 11, 2024 and sell it today you would lose (4.00) from holding GACM Technologies Limited or give up 4.21% of portfolio value over 90 days.

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

Prakash Steelage Limited  vs.  GACM Technologies Limited

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 uncertain 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 Prakash Steelage and GACM Technologies

The main advantage of trading using opposite Prakash Steelage and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prakash Steelage 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 Prakash Steelage 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.