Correlation Between MCX ICOMDEX and GTL

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

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

Diversification Opportunities for MCX ICOMDEX and GTL

-0.53

Correlation Coefficient

MCX ICOMDEX  GTL

Excellent diversification

The 3 months correlation between MCX and GTL is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding MCX ICOMDEX ALUMINIUM and GTL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GTL Limited and MCX ICOMDEX 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 MCX ICOMDEX ALUMINIUM are associated (or correlated) with GTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GTL Limited has no effect on the direction of MCX ICOMDEX i.e., MCX ICOMDEX and GTL go up and down completely randomly.

Pair Corralation between MCX ICOMDEX and GTL

Assuming the 90 days trading horizon MCX ICOMDEX ALUMINIUM is expected to generate 0.25 times more return on investment than GTL. However, MCX ICOMDEX ALUMINIUM is 3.97 times less risky than GTL. It trades about 0.09 of its potential returns per unit of risk. GTL Limited is currently generating about 0.0 per unit of risk. If you would invest  1,121,799  in MCX ICOMDEX ALUMINIUM on August 31, 2024 and sell it today you would earn a total of  52,722  from holding MCX ICOMDEX ALUMINIUM or generate 4.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	69.84%
Values	Daily Returns

MCX ICOMDEX ALUMINIUM  vs.  GTL Limited

Pair Trading with MCX ICOMDEX and GTL

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

The idea behind MCX ICOMDEX ALUMINIUM and GTL 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.