Correlation Between Gamma Communications and International Consolidated

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

By analyzing existing cross correlation between Gamma Communications plc and International Consolidated Airlines, you can compare the effects of market volatilities on Gamma Communications and International Consolidated 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 Gamma Communications with a short position of International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and International Consolidated.

Diversification Opportunities for Gamma Communications and International Consolidated

-0.25

Correlation Coefficient

Gamma Communications  International Consolidated

Very good diversification

The 3 months correlation between Gamma and International is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated and Gamma Communications 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 Gamma Communications plc are associated (or correlated) with International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Gamma Communications i.e., Gamma Communications and International Consolidated go up and down completely randomly.

Pair Corralation between Gamma Communications and International Consolidated

Assuming the 90 days horizon Gamma Communications is expected to generate 1.65 times less return on investment than International Consolidated. In addition to that, Gamma Communications is 1.15 times more volatile than International Consolidated Airlines. It trades about 0.05 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.1 per unit of volatility. If you would invest  155.00  in International Consolidated Airlines on September 26, 2024 and sell it today you would earn a total of  215.00  from holding International Consolidated Airlines or generate 138.71% return on investment over 90 days.

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

Gamma Communications plc  vs.  International Consolidated Air

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

International Consolidated

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gamma Communications and International Consolidated

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

The idea behind Gamma Communications plc and International Consolidated Airlines 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.