Correlation Between RSL Electronics and Gamatronic Electronic

Can any of the company-specific risk be diversified away by investing in both RSL Electronics and Gamatronic Electronic 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 RSL Electronics and Gamatronic Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RSL Electronics and Gamatronic Electronic Industries, you can compare the effects of market volatilities on RSL Electronics and Gamatronic Electronic 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 RSL Electronics with a short position of Gamatronic Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of RSL Electronics and Gamatronic Electronic.

Diversification Opportunities for RSL Electronics and Gamatronic Electronic

0.38

Correlation Coefficient

RSL Electronics  Gamatronic Electronic

Weak diversification

The 3 months correlation between RSL and Gamatronic is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RSL Electronics and Gamatronic Electronic Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamatronic Electronic and RSL Electronics 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 RSL Electronics are associated (or correlated) with Gamatronic Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamatronic Electronic has no effect on the direction of RSL Electronics i.e., RSL Electronics and Gamatronic Electronic go up and down completely randomly.

Pair Corralation between RSL Electronics and Gamatronic Electronic

Assuming the 90 days trading horizon RSL Electronics is expected to generate 1.88 times less return on investment than Gamatronic Electronic. But when comparing it to its historical volatility, RSL Electronics is 3.17 times less risky than Gamatronic Electronic. It trades about 0.18 of its potential returns per unit of risk. Gamatronic Electronic Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  106,500  in Gamatronic Electronic Industries on September 12, 2024 and sell it today you would earn a total of  31,900  from holding Gamatronic Electronic Industries or generate 29.95% return on investment over 90 days.

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

RSL Electronics  vs.  Gamatronic Electronic Industri

RSL Electronics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RSL Electronics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RSL Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Gamatronic Electronic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gamatronic Electronic Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gamatronic Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RSL Electronics and Gamatronic Electronic

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

The idea behind RSL Electronics and Gamatronic Electronic Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.