Correlation Between Total Transport and GACM Technologies

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

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

Diversification Opportunities for Total Transport and GACM Technologies

0.46

Correlation Coefficient

Total Transport  GACM Technologies

Very weak diversification

The 3 months correlation between Total and GACM is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies and Total Transport 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 Total Transport Systems 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 Total Transport i.e., Total Transport and GACM Technologies go up and down completely randomly.

Pair Corralation between Total Transport and GACM Technologies

Assuming the 90 days trading horizon Total Transport Systems is expected to generate 0.71 times more return on investment than GACM Technologies. However, Total Transport Systems is 1.41 times less risky than GACM Technologies. It trades about -0.05 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.2 per unit of risk. If you would invest  15,352  in Total Transport Systems on October 5, 2024 and sell it today you would lose (8,046) from holding Total Transport Systems or give up 52.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.46%
Values	Daily Returns

Total Transport Systems  vs.  GACM Technologies Limited

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 rather sound fundamental indicators, GACM Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Total Transport and GACM Technologies

The main advantage of trading using opposite Total Transport and GACM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Transport 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 Total Transport Systems 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.