Correlation Between Indian Metals and IG Petrochemicals
Can any of the company-specific risk be diversified away by investing in both Indian Metals and IG Petrochemicals 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 Indian Metals and IG Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Metals Ferro and IG Petrochemicals Limited, you can compare the effects of market volatilities on Indian Metals and IG Petrochemicals 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 Indian Metals with a short position of IG Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and IG Petrochemicals.
Diversification Opportunities for Indian Metals and IG Petrochemicals
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Indian and IGPL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of Indian Metals i.e., Indian Metals and IG Petrochemicals go up and down completely randomly.
Pair Corralation between Indian Metals and IG Petrochemicals
Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.06 times more return on investment than IG Petrochemicals. However, Indian Metals is 1.06 times more volatile than IG Petrochemicals Limited. It trades about -0.06 of its potential returns per unit of risk. IG Petrochemicals Limited is currently generating about -0.26 per unit of risk. If you would invest 96,045 in Indian Metals Ferro on October 10, 2024 and sell it today you would lose (3,360) from holding Indian Metals Ferro or give up 3.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Indian Metals Ferro vs. IG Petrochemicals Limited
Performance |
| Timeline |
| Indian Metals Ferro |
| IG Petrochemicals |
Indian Metals and IG Petrochemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Metals and IG Petrochemicals
The main advantage of trading using opposite Indian Metals and IG Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, IG Petrochemicals 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 IG Petrochemicals will offset losses from the drop in IG Petrochemicals' long position.| Indian Metals vs. Lemon Tree Hotels | Indian Metals vs. EIH Associated Hotels | Indian Metals vs. Taj GVK Hotels | Indian Metals vs. Royal Orchid Hotels |
| IG Petrochemicals vs. Compucom Software Limited | IG Petrochemicals vs. Tera Software Limited | IG Petrochemicals vs. Speciality Restaurants Limited | IG Petrochemicals vs. Kingfa Science Technology |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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