Correlation Between GM Breweries and Dev Information

Can any of the company-specific risk be diversified away by investing in both GM Breweries and Dev Information 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 GM Breweries and Dev Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GM Breweries Limited and Dev Information Technology, you can compare the effects of market volatilities on GM Breweries and Dev Information 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 GM Breweries with a short position of Dev Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Dev Information.

Diversification Opportunities for GM Breweries and Dev Information

-0.49

Correlation Coefficient

GM Breweries  Dev Information

Very good diversification

The 3 months correlation between GMBREW and Dev is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Dev Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dev Information Tech and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Dev Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dev Information Tech has no effect on the direction of GM Breweries i.e., GM Breweries and Dev Information go up and down completely randomly.

Pair Corralation between GM Breweries and Dev Information

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the Dev Information. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.5 times less risky than Dev Information. The stock trades about -0.11 of its potential returns per unit of risk. The Dev Information Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,775  in Dev Information Technology on September 14, 2024 and sell it today you would earn a total of  2,501  from holding Dev Information Technology or generate 19.58% return on investment over 90 days.

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

GM Breweries Limited  vs.  Dev Information Technology

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dev Information Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dev Information Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Dev Information displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM Breweries and Dev Information

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

The idea behind GM Breweries Limited and Dev Information Technology 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.