Correlation Between Rajnandini Metal and GACM Technologies

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

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

Diversification Opportunities for Rajnandini Metal and GACM Technologies

0.52

Correlation Coefficient

Rajnandini Metal  GACM Technologies

Very weak diversification

The 3 months correlation between Rajnandini and GACM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal 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 Rajnandini Metal 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 Rajnandini Metal 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 Rajnandini Metal i.e., Rajnandini Metal and GACM Technologies go up and down completely randomly.

Pair Corralation between Rajnandini Metal and GACM Technologies

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the GACM Technologies. In addition to that, Rajnandini Metal is 1.01 times more volatile than GACM Technologies Limited. It trades about -0.11 of its total potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.1 per unit of volatility. If you would invest  103.00  in GACM Technologies Limited on October 6, 2024 and sell it today you would lose (11.00) from holding GACM Technologies Limited or give up 10.68% of portfolio value over 90 days.

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

Rajnandini Metal Limited  vs.  GACM Technologies Limited

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Rajnandini Metal and GACM Technologies

The main advantage of trading using opposite Rajnandini Metal and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal 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 Rajnandini Metal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.