Correlation Between ABM International and Gujarat Raffia

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Can any of the company-specific risk be diversified away by investing in both ABM International and Gujarat Raffia 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 ABM International and Gujarat Raffia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABM International Limited and Gujarat Raffia Industries, you can compare the effects of market volatilities on ABM International and Gujarat Raffia 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 ABM International with a short position of Gujarat Raffia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM International and Gujarat Raffia.

Diversification Opportunities for ABM International and Gujarat Raffia

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between ABM and Gujarat is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding ABM International Limited and Gujarat Raffia Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Raffia Industries and ABM International 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 ABM International Limited are associated (or correlated) with Gujarat Raffia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Raffia Industries has no effect on the direction of ABM International i.e., ABM International and Gujarat Raffia go up and down completely randomly.

Pair Corralation between ABM International and Gujarat Raffia

Assuming the 90 days trading horizon ABM International Limited is expected to under-perform the Gujarat Raffia. In addition to that, ABM International is 2.0 times more volatile than Gujarat Raffia Industries. It trades about -0.31 of its total potential returns per unit of risk. Gujarat Raffia Industries is currently generating about -0.06 per unit of volatility. If you would invest  4,547  in Gujarat Raffia Industries on September 2, 2024 and sell it today you would lose (153.00) from holding Gujarat Raffia Industries or give up 3.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ABM International Limited  vs.  Gujarat Raffia Industries

 Performance 
       Timeline  
ABM International 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ABM International Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, ABM International disclosed solid returns over the last few months and may actually be approaching a breakup point.
Gujarat Raffia Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gujarat Raffia Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ABM International and Gujarat Raffia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ABM International and Gujarat Raffia

The main advantage of trading using opposite ABM International and Gujarat Raffia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM International position performs unexpectedly, Gujarat Raffia 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 Gujarat Raffia will offset losses from the drop in Gujarat Raffia's long position.
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The idea behind ABM International Limited and Gujarat Raffia Industries 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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