Correlation Between GCS Holdings and Penpower Technology

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

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

Diversification Opportunities for GCS Holdings and Penpower Technology

0.54

Correlation Coefficient

GCS Holdings  Penpower Technology

Very weak diversification

The 3 months correlation between GCS and Penpower is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GCS Holdings and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology and GCS Holdings 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 GCS Holdings are associated (or correlated) with Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of GCS Holdings i.e., GCS Holdings and Penpower Technology go up and down completely randomly.

Pair Corralation between GCS Holdings and Penpower Technology

Assuming the 90 days trading horizon GCS Holdings is expected to generate 1.04 times more return on investment than Penpower Technology. However, GCS Holdings is 1.04 times more volatile than Penpower Technology. It trades about 0.1 of its potential returns per unit of risk. Penpower Technology is currently generating about 0.04 per unit of risk. If you would invest  3,835  in GCS Holdings on September 24, 2024 and sell it today you would earn a total of  8,415  from holding GCS Holdings or generate 219.43% return on investment over 90 days.

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

GCS Holdings  vs.  Penpower Technology

GCS Holdings

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GCS Holdings are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GCS Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Penpower Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penpower Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Penpower Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GCS Holdings and Penpower Technology

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

The idea behind GCS Holdings and Penpower Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.