Correlation Between GTL and Electronics Mart

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

By analyzing existing cross correlation between GTL Limited and Electronics Mart India, you can compare the effects of market volatilities on GTL and Electronics Mart 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 Electronics Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of GTL and Electronics Mart.

Diversification Opportunities for GTL and Electronics Mart

0.73

Correlation Coefficient

GTL  Electronics Mart

Poor diversification

The 3 months correlation between GTL and Electronics is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and Electronics Mart India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Mart India 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 Electronics Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Mart India has no effect on the direction of GTL i.e., GTL and Electronics Mart go up and down completely randomly.

Pair Corralation between GTL and Electronics Mart

Assuming the 90 days trading horizon GTL Limited is expected to generate 1.71 times more return on investment than Electronics Mart. However, GTL is 1.71 times more volatile than Electronics Mart India. It trades about 0.0 of its potential returns per unit of risk. Electronics Mart India is currently generating about -0.1 per unit of risk. If you would invest  1,373  in GTL Limited on August 31, 2024 and sell it today you would lose (76.00) from holding GTL Limited or give up 5.54% of portfolio value over 90 days.

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

GTL Limited  vs.  Electronics Mart India

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.

Electronics Mart India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronics Mart India 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 comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GTL and Electronics Mart

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

The idea behind GTL Limited and Electronics Mart India 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.