Correlation Between Speciality Restaurants and GM Breweries

Can any of the company-specific risk be diversified away by investing in both Speciality Restaurants and GM Breweries 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 Speciality Restaurants and GM Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Speciality Restaurants and GM Breweries

0.5

Correlation Coefficient

Speciality Restaurants  GM Breweries

Very weak diversification

The 3 months correlation between Speciality and GMBREW is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries Limited and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and GM Breweries go up and down completely randomly.

Pair Corralation between Speciality Restaurants and GM Breweries

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the GM Breweries. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.4 times less risky than GM Breweries. The stock trades about -0.17 of its potential returns per unit of risk. The GM Breweries Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  77,970  in GM Breweries Limited on September 25, 2024 and sell it today you would earn a total of  2,745  from holding GM Breweries Limited or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Speciality Restaurants Limited  vs.  GM Breweries Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Speciality Restaurants and GM Breweries

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

The idea behind Speciality Restaurants Limited and GM Breweries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.