Correlation Between Salzer Electronics and GPT Healthcare

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

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

Diversification Opportunities for Salzer Electronics and GPT Healthcare

0.38

Correlation Coefficient

Salzer Electronics  GPT Healthcare

Weak diversification

The 3 months correlation between Salzer and GPT is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Salzer Electronics Limited and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare and Salzer Electronics 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 Salzer Electronics Limited are associated (or correlated) with GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of Salzer Electronics i.e., Salzer Electronics and GPT Healthcare go up and down completely randomly.

Pair Corralation between Salzer Electronics and GPT Healthcare

Assuming the 90 days trading horizon Salzer Electronics Limited is expected to generate 2.49 times more return on investment than GPT Healthcare. However, Salzer Electronics is 2.49 times more volatile than GPT Healthcare. It trades about 0.68 of its potential returns per unit of risk. GPT Healthcare is currently generating about 0.32 per unit of risk. If you would invest  101,165  in Salzer Electronics Limited on September 23, 2024 and sell it today you would earn a total of  58,450  from holding Salzer Electronics Limited or generate 57.78% return on investment over 90 days.

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

Salzer Electronics Limited  vs.  GPT Healthcare

Salzer Electronics

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Salzer Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Salzer Electronics and GPT Healthcare

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

The idea behind Salzer Electronics Limited and GPT Healthcare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.