Correlation Between GrandTech and MetaTech

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

By analyzing existing cross correlation between GrandTech CG Systems and MetaTech AP, you can compare the effects of market volatilities on GrandTech and MetaTech 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 GrandTech with a short position of MetaTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrandTech and MetaTech.

Diversification Opportunities for GrandTech and MetaTech

-0.57

Correlation Coefficient

GrandTech  MetaTech

Excellent diversification

The 3 months correlation between GrandTech and MetaTech is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding GrandTech CG Systems and MetaTech AP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetaTech AP and GrandTech 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 GrandTech CG Systems are associated (or correlated) with MetaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetaTech AP has no effect on the direction of GrandTech i.e., GrandTech and MetaTech go up and down completely randomly.

Pair Corralation between GrandTech and MetaTech

Assuming the 90 days trading horizon GrandTech is expected to generate 2.77 times less return on investment than MetaTech. But when comparing it to its historical volatility, GrandTech CG Systems is 1.95 times less risky than MetaTech. It trades about 0.02 of its potential returns per unit of risk. MetaTech AP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,055  in MetaTech AP on September 21, 2024 and sell it today you would earn a total of  1,085  from holding MetaTech AP or generate 26.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

GrandTech CG Systems  vs.  MetaTech AP

GrandTech CG Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrandTech CG Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

MetaTech AP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MetaTech AP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, MetaTech 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 GrandTech and MetaTech

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

The idea behind GrandTech CG Systems and MetaTech AP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.