Correlation Between Indian Metals and Southern Petrochemicals
Can any of the company-specific risk be diversified away by investing in both Indian Metals and Southern 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 Southern 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 Southern Petrochemicals Industries, you can compare the effects of market volatilities on Indian Metals and Southern 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 Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Southern Petrochemicals.
Diversification Opportunities for Indian Metals and Southern Petrochemicals
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Indian and Southern is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Indian Metals i.e., Indian Metals and Southern Petrochemicals go up and down completely randomly.
Pair Corralation between Indian Metals and Southern Petrochemicals
Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.58 times more return on investment than Southern Petrochemicals. However, Indian Metals is 1.58 times more volatile than Southern Petrochemicals Industries. It trades about 0.32 of its potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about 0.15 per unit of risk. If you would invest 79,970 in Indian Metals Ferro on September 21, 2024 and sell it today you would earn a total of 13,605 from holding Indian Metals Ferro or generate 17.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Indian Metals Ferro vs. Southern Petrochemicals Indust
Performance |
| Timeline |
| Indian Metals Ferro |
| Southern Petrochemicals |
Indian Metals and Southern Petrochemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Metals and Southern Petrochemicals
The main advantage of trading using opposite Indian Metals and Southern Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, Southern 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 Southern Petrochemicals will offset losses from the drop in Southern Petrochemicals' long position.| Indian Metals vs. Embassy Office Parks | Indian Metals vs. Gujarat Narmada Valley | Indian Metals vs. Gujarat Alkalies and | Indian Metals vs. India Glycols Limited |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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