Correlation Between GM Breweries and Orissa Minerals

Can any of the company-specific risk be diversified away by investing in both GM Breweries and Orissa Minerals 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 Orissa Minerals 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 The Orissa Minerals, you can compare the effects of market volatilities on GM Breweries and Orissa Minerals 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 Orissa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Orissa Minerals.

Diversification Opportunities for GM Breweries and Orissa Minerals

0.62

Correlation Coefficient

GM Breweries  Orissa Minerals

Poor diversification

The 3 months correlation between GMBREW and Orissa is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and The Orissa Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orissa Minerals 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 Orissa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orissa Minerals has no effect on the direction of GM Breweries i.e., GM Breweries and Orissa Minerals go up and down completely randomly.

Pair Corralation between GM Breweries and Orissa Minerals

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 2.03 times more return on investment than Orissa Minerals. However, GM Breweries is 2.03 times more volatile than The Orissa Minerals. It trades about 0.01 of its potential returns per unit of risk. The Orissa Minerals is currently generating about -0.37 per unit of risk. If you would invest  80,345  in GM Breweries Limited on September 28, 2024 and sell it today you would earn a total of  5.00  from holding GM Breweries Limited or generate 0.01% return on investment over 90 days.

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

GM Breweries Limited  vs.  The Orissa Minerals

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 unfluctuating 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.

Orissa Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Orissa Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GM Breweries and Orissa Minerals

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

The idea behind GM Breweries Limited and The Orissa Minerals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.