Correlation Between GM Breweries and Electronics Mart

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

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

Diversification Opportunities for GM Breweries and Electronics Mart

0.02

Correlation Coefficient

GM Breweries  Electronics Mart

Significant diversification

The 3 months correlation between GMBREW and Electronics is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Electronics Mart India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Mart India and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Electronics Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Mart India has no effect on the direction of GM Breweries i.e., GM Breweries and Electronics Mart go up and down completely randomly.

Pair Corralation between GM Breweries and Electronics Mart

Assuming the 90 days trading horizon GM Breweries is expected to generate 1.64 times less return on investment than Electronics Mart. But when comparing it to its historical volatility, GM Breweries Limited is 1.59 times less risky than Electronics Mart. It trades about 0.09 of its potential returns per unit of risk. Electronics Mart India is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,411  in Electronics Mart India on March 24, 2025 and sell it today you would earn a total of  2,504  from holding Electronics Mart India or generate 20.18% return on investment over 90 days.

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

GM Breweries Limited  vs.  Electronics Mart India

GM Breweries Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GM Breweries Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, GM Breweries sustained solid returns over the last few months and may actually be approaching a breakup point.

Electronics Mart India

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronics Mart India are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Electronics Mart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM Breweries and Electronics Mart

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

The idea behind GM Breweries Limited and Electronics Mart India 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.