Correlation Between Globaltek Fabrication and Giant Manufacturing

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

By analyzing existing cross correlation between Globaltek Fabrication Co and Giant Manufacturing Co, you can compare the effects of market volatilities on Globaltek Fabrication and Giant Manufacturing 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 Globaltek Fabrication with a short position of Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globaltek Fabrication and Giant Manufacturing.

Diversification Opportunities for Globaltek Fabrication and Giant Manufacturing

0.89

Correlation Coefficient

Globaltek Fabrication  Giant Manufacturing

Very poor diversification

The 3 months correlation between Globaltek and Giant is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Globaltek Fabrication Co and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing and Globaltek Fabrication 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 Globaltek Fabrication Co are associated (or correlated) with Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Globaltek Fabrication i.e., Globaltek Fabrication and Giant Manufacturing go up and down completely randomly.

Pair Corralation between Globaltek Fabrication and Giant Manufacturing

Assuming the 90 days trading horizon Globaltek Fabrication Co is expected to generate 1.08 times more return on investment than Giant Manufacturing. However, Globaltek Fabrication is 1.08 times more volatile than Giant Manufacturing Co. It trades about -0.12 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about -0.24 per unit of risk. If you would invest  9,030  in Globaltek Fabrication Co on September 15, 2024 and sell it today you would lose (1,730) from holding Globaltek Fabrication Co or give up 19.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Globaltek Fabrication Co  vs.  Giant Manufacturing Co

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Giant Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giant Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Globaltek Fabrication and Giant Manufacturing

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

The idea behind Globaltek Fabrication Co and Giant Manufacturing Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.