Correlation Between GACM Technologies and India Glycols

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

Diversification Opportunities for GACM Technologies and India Glycols

0.29

Correlation Coefficient

GACM Technologies  India Glycols

Modest diversification

The 3 months correlation between GACM and India is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding GACM Technologies Limited and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols Limited 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 India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of GACM Technologies i.e., GACM Technologies and India Glycols go up and down completely randomly.

Pair Corralation between GACM Technologies and India Glycols

Assuming the 90 days trading horizon GACM Technologies Limited is expected to under-perform the India Glycols. In addition to that, GACM Technologies is 1.0 times more volatile than India Glycols Limited. It trades about -0.32 of its total potential returns per unit of risk. India Glycols Limited is currently generating about -0.01 per unit of volatility. If you would invest  135,395  in India Glycols Limited on September 3, 2024 and sell it today you would lose (7,800) from holding India Glycols Limited or give up 5.76% of portfolio value over 90 days.

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

GACM Technologies Limited  vs.  India Glycols 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 weak 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.

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, India Glycols is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GACM Technologies and India Glycols

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

The idea behind GACM Technologies Limited and India Glycols 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.