Correlation Between Gatron Industries and Fateh Sports

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

By analyzing existing cross correlation between Gatron Industries and Fateh Sports Wear, you can compare the effects of market volatilities on Gatron Industries and Fateh Sports 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 Gatron Industries with a short position of Fateh Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatron Industries and Fateh Sports.

Diversification Opportunities for Gatron Industries and Fateh Sports

-0.61

Correlation Coefficient

Gatron Industries  Fateh Sports

Excellent diversification

The 3 months correlation between Gatron and Fateh is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gatron Industries and Fateh Sports Wear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fateh Sports Wear and Gatron Industries 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 Gatron Industries are associated (or correlated) with Fateh Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fateh Sports Wear has no effect on the direction of Gatron Industries i.e., Gatron Industries and Fateh Sports go up and down completely randomly.

Pair Corralation between Gatron Industries and Fateh Sports

Assuming the 90 days trading horizon Gatron Industries is expected to generate 0.28 times more return on investment than Fateh Sports. However, Gatron Industries is 3.54 times less risky than Fateh Sports. It trades about -0.02 of its potential returns per unit of risk. Fateh Sports Wear is currently generating about -0.05 per unit of risk. If you would invest  18,914  in Gatron Industries on September 12, 2024 and sell it today you would lose (415.00) from holding Gatron Industries or give up 2.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	36.51%
Values	Daily Returns

Gatron Industries  vs.  Fateh Sports Wear

Gatron Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gatron Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fateh Sports Wear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fateh Sports Wear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Gatron Industries and Fateh Sports

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

The idea behind Gatron Industries and Fateh Sports Wear 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.