Correlation Between SBI Cards and GACM Technologies

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

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

Diversification Opportunities for SBI Cards and GACM Technologies

0.69

Correlation Coefficient

SBI Cards  GACM Technologies

Poor diversification

The 3 months correlation between SBI and GACM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SBI Cards and and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and SBI Cards 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 SBI Cards and 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 SBI Cards i.e., SBI Cards and GACM Technologies go up and down completely randomly.

Pair Corralation between SBI Cards and GACM Technologies

Assuming the 90 days trading horizon SBI Cards and is expected to generate 0.32 times more return on investment than GACM Technologies. However, SBI Cards and is 3.08 times less risky than GACM Technologies. It trades about -0.03 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.21 per unit of risk. If you would invest  72,300  in SBI Cards and on September 29, 2024 and sell it today you would lose (4,770) from holding SBI Cards and or give up 6.6% of portfolio value over 90 days.

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

SBI Cards and  vs.  GACM Technologies Limited

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Cards and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 SBI Cards and GACM Technologies

The main advantage of trading using opposite SBI Cards and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Cards 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 SBI Cards and 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .