Correlation Between Automotive Stampings and Aarti Drugs

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

Diversification Opportunities for Automotive Stampings and Aarti Drugs

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Automotive and Aarti is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Stampings and and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited and Automotive Stampings 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 Automotive Stampings and are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Automotive Stampings i.e., Automotive Stampings and Aarti Drugs go up and down completely randomly.

Pair Corralation between Automotive Stampings and Aarti Drugs

Assuming the 90 days trading horizon Automotive Stampings and is expected to generate 1.44 times more return on investment than Aarti Drugs. However, Automotive Stampings is 1.44 times more volatile than Aarti Drugs Limited. It trades about 0.05 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about 0.02 per unit of risk. If you would invest  33,265  in Automotive Stampings and on October 16, 2024 and sell it today you would earn a total of  26,175  from holding Automotive Stampings and or generate 78.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Automotive Stampings and  vs.  Aarti Drugs Limited

 Performance 
       Timeline  
Automotive Stampings and 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Automotive Stampings and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Aarti Drugs Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Automotive Stampings and Aarti Drugs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Automotive Stampings and Aarti Drugs

The main advantage of trading using opposite Automotive Stampings and Aarti Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automotive Stampings position performs unexpectedly, Aarti Drugs 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 Aarti Drugs will offset losses from the drop in Aarti Drugs' long position.
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The idea behind Automotive Stampings and and Aarti Drugs 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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Check out your portfolio center.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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