Correlation Between GACM Technologies and Aarey Drugs

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

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

Diversification Opportunities for GACM Technologies and Aarey Drugs

0.75

Correlation Coefficient

GACM Technologies  Aarey Drugs

Poor diversification

The 3 months correlation between GACM and Aarey is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Aarey Drugs Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarey Drugs Pharmace and GACM Technologies 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 GACM Technologies Limited are associated (or correlated) with Aarey Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarey Drugs Pharmace has no effect on the direction of GACM Technologies i.e., GACM Technologies and Aarey Drugs go up and down completely randomly.

Pair Corralation between GACM Technologies and Aarey Drugs

Assuming the 90 days trading horizon GACM Technologies Limited is expected to generate 1.18 times more return on investment than Aarey Drugs. However, GACM Technologies is 1.18 times more volatile than Aarey Drugs Pharmaceuticals. It trades about 0.29 of its potential returns per unit of risk. Aarey Drugs Pharmaceuticals is currently generating about 0.1 per unit of risk. If you would invest  83.00  in GACM Technologies Limited on September 14, 2024 and sell it today you would earn a total of  13.00  from holding GACM Technologies Limited or generate 15.66% return on investment over 90 days.

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

GACM Technologies Limited  vs.  Aarey Drugs Pharmaceuticals

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aarey Drugs Pharmace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarey Drugs Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GACM Technologies and Aarey Drugs

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

The idea behind GACM Technologies Limited and Aarey Drugs Pharmaceuticals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.