Correlation Between GACM Technologies and Golden Tobacco

Can any of the company-specific risk be diversified away by investing in both GACM Technologies and Golden Tobacco 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 Golden Tobacco 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 Golden Tobacco Limited, you can compare the effects of market volatilities on GACM Technologies and Golden Tobacco 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 Golden Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of GACM Technologies and Golden Tobacco.

Diversification Opportunities for GACM Technologies and Golden Tobacco

0.68

Correlation Coefficient

GACM Technologies  Golden Tobacco

Poor diversification

The 3 months correlation between GACM and Golden is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco 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 Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of GACM Technologies i.e., GACM Technologies and Golden Tobacco go up and down completely randomly.

Pair Corralation between GACM Technologies and Golden Tobacco

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the Golden Tobacco. In addition to that, GACM Technologies is 1.13 times more volatile than Golden Tobacco Limited. It trades about -0.04 of its total potential returns per unit of risk. Golden Tobacco Limited is currently generating about -0.04 per unit of volatility. If you would invest  4,221  in Golden Tobacco Limited on September 27, 2024 and sell it today you would lose (320.00) from holding Golden Tobacco Limited or give up 7.58% of portfolio value over 90 days.

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

GACM Technologies Limited  vs.  Golden Tobacco Limited

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 latest conflicting performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GACM Technologies and Golden Tobacco

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

The idea behind GACM Technologies Limited and Golden Tobacco Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.