Correlation Between GEK TERNA and Alumil Aluminium

Can any of the company-specific risk be diversified away by investing in both GEK TERNA and Alumil Aluminium 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 GEK TERNA and Alumil Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEK TERNA Holdings and Alumil Aluminium Industry, you can compare the effects of market volatilities on GEK TERNA and Alumil Aluminium 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 GEK TERNA with a short position of Alumil Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEK TERNA and Alumil Aluminium.

Diversification Opportunities for GEK TERNA and Alumil Aluminium

0.6

Correlation Coefficient

GEK TERNA  Alumil Aluminium

Poor diversification

The 3 months correlation between GEK and Alumil is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GEK TERNA Holdings and Alumil Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Aluminium Industry and GEK TERNA 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 GEK TERNA Holdings are associated (or correlated) with Alumil Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Aluminium Industry has no effect on the direction of GEK TERNA i.e., GEK TERNA and Alumil Aluminium go up and down completely randomly.

Pair Corralation between GEK TERNA and Alumil Aluminium

Assuming the 90 days trading horizon GEK TERNA is expected to generate 2.5 times less return on investment than Alumil Aluminium. But when comparing it to its historical volatility, GEK TERNA Holdings is 1.81 times less risky than Alumil Aluminium. It trades about 0.19 of its potential returns per unit of risk. Alumil Aluminium Industry is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  279.00  in Alumil Aluminium Industry on September 5, 2024 and sell it today you would earn a total of  121.00  from holding Alumil Aluminium Industry or generate 43.37% return on investment over 90 days.

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

GEK TERNA Holdings  vs.  Alumil Aluminium Industry

GEK TERNA Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEK TERNA Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, GEK TERNA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alumil Aluminium Industry

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alumil Aluminium Industry are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alumil Aluminium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEK TERNA and Alumil Aluminium

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

The idea behind GEK TERNA Holdings and Alumil Aluminium Industry 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 Stocks Directory module to find actively traded stocks across global markets.