Correlation Between Thermax and GACM Technologies

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

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

Diversification Opportunities for Thermax and GACM Technologies

-0.01

Correlation Coefficient

Thermax  GACM Technologies

Good diversification

The 3 months correlation between Thermax and GACM is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Thermax 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 Thermax 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 Thermax 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 Thermax i.e., Thermax and GACM Technologies go up and down completely randomly.

Pair Corralation between Thermax and GACM Technologies

Assuming the 90 days trading horizon Thermax Limited is expected to generate 0.69 times more return on investment than GACM Technologies. However, Thermax Limited is 1.46 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 -0.1 per unit of risk. If you would invest  521,250  in Thermax Limited on September 17, 2024 and sell it today you would lose (30,765) from holding Thermax Limited or give up 5.9% of portfolio value over 90 days.

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

Thermax Limited  vs.  GACM Technologies Limited

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 conflicting performance in the last few months, the Stock's fundamental 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.

Pair Trading with Thermax and GACM Technologies

The main advantage of trading using opposite Thermax and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermax 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 Thermax 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.