Correlation Between GTL and Delta Manufacturing

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

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

Diversification Opportunities for GTL and Delta Manufacturing

0.26

Correlation Coefficient

GTL  Delta Manufacturing

Modest diversification

The 3 months correlation between GTL and Delta is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and Delta Manufacturing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Manufacturing and GTL 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 GTL Limited are associated (or correlated) with Delta Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Manufacturing has no effect on the direction of GTL i.e., GTL and Delta Manufacturing go up and down completely randomly.

Pair Corralation between GTL and Delta Manufacturing

Assuming the 90 days trading horizon GTL is expected to generate 31.05 times less return on investment than Delta Manufacturing. In addition to that, GTL is 1.25 times more volatile than Delta Manufacturing Limited. It trades about 0.0 of its total potential returns per unit of risk. Delta Manufacturing Limited is currently generating about 0.09 per unit of volatility. If you would invest  8,968  in Delta Manufacturing Limited on August 31, 2024 and sell it today you would earn a total of  1,527  from holding Delta Manufacturing Limited or generate 17.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

GTL Limited  vs.  Delta Manufacturing Limited

GTL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GTL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, GTL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Delta Manufacturing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Delta Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GTL and Delta Manufacturing

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

The idea behind GTL Limited and Delta Manufacturing 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.