Correlation Between GPT Healthcare and Reliance Industries

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

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

Diversification Opportunities for GPT Healthcare and Reliance Industries

0.33

Correlation Coefficient

GPT Healthcare  Reliance Industries

Weak diversification

The 3 months correlation between GPT and Reliance is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and GPT Healthcare 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 GPT Healthcare are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Reliance Industries go up and down completely randomly.

Pair Corralation between GPT Healthcare and Reliance Industries

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 1.87 times more return on investment than Reliance Industries. However, GPT Healthcare is 1.87 times more volatile than Reliance Industries Limited. It trades about 0.07 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about -0.1 per unit of risk. If you would invest  14,986  in GPT Healthcare on September 23, 2024 and sell it today you would earn a total of  2,816  from holding GPT Healthcare or generate 18.79% return on investment over 90 days.

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

GPT Healthcare  vs.  Reliance Industries Limited

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries 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 basic 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.

Pair Trading with GPT Healthcare and Reliance Industries

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

The idea behind GPT Healthcare and Reliance Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.