Correlation Between Taj GVK and GM Breweries

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

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

Diversification Opportunities for Taj GVK and GM Breweries

-0.06

Correlation Coefficient

Taj GVK  GM Breweries

Good diversification

The 3 months correlation between Taj and GMBREW is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries Limited and Taj GVK 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 Taj GVK Hotels are associated (or correlated) with GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of Taj GVK i.e., Taj GVK and GM Breweries go up and down completely randomly.

Pair Corralation between Taj GVK and GM Breweries

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 0.95 times more return on investment than GM Breweries. However, Taj GVK Hotels is 1.05 times less risky than GM Breweries. It trades about 0.17 of its potential returns per unit of risk. GM Breweries Limited is currently generating about -0.03 per unit of risk. If you would invest  30,940  in Taj GVK Hotels on September 19, 2024 and sell it today you would earn a total of  7,910  from holding Taj GVK Hotels or generate 25.57% return on investment over 90 days.

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

Taj GVK Hotels  vs.  GM Breweries Limited

Taj GVK Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Taj GVK and GM Breweries

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

The idea behind Taj GVK Hotels and GM Breweries 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.