Correlation Between State Trading and GTL

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

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

Diversification Opportunities for State Trading and GTL

0.62

Correlation Coefficient

State Trading  GTL

Poor diversification

The 3 months correlation between State and GTL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and GTL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GTL Limited and State Trading 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 The State Trading 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 State Trading i.e., State Trading and GTL go up and down completely randomly.

Pair Corralation between State Trading and GTL

Assuming the 90 days trading horizon The State Trading is expected to under-perform the GTL. But the stock apears to be less risky and, when comparing its historical volatility, The State Trading is 1.3 times less risky than GTL. The stock trades about -0.07 of its potential returns per unit of risk. The GTL Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,373  in GTL Limited on September 2, 2024 and sell it today you would lose (86.00) from holding GTL Limited or give up 6.26% of portfolio value over 90 days.

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

The State Trading  vs.  GTL Limited

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Trading and GTL

The main advantage of trading using opposite State Trading and GTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Trading 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 The State Trading 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.