Correlation Between Rico Auto and GACM Technologies

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

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

Diversification Opportunities for Rico Auto and GACM Technologies

0.68

Correlation Coefficient

Rico Auto  GACM Technologies

Poor diversification

The 3 months correlation between Rico and GACM is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Rico Auto 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 Rico Auto Industries 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 Rico Auto i.e., Rico Auto and GACM Technologies go up and down completely randomly.

Pair Corralation between Rico Auto and GACM Technologies

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the GACM Technologies. In addition to that, Rico Auto is 2.24 times more volatile than GACM Technologies Limited. It trades about -0.14 of its total potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.14 per unit of volatility. If you would invest  99.00  in GACM Technologies Limited on December 1, 2024 and sell it today you would lose (15.00) from holding GACM Technologies Limited or give up 15.15% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  GACM Technologies Limited

Rico Auto Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GACM Technologies

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rico Auto and GACM Technologies

The main advantage of trading using opposite Rico Auto and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rico Auto 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 Rico Auto Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.