Correlation Between Paramount Communications and Garware Hi-Tech
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By analyzing existing cross correlation between Paramount Communications Limited and Garware Hi Tech Films, you can compare the effects of market volatilities on Paramount Communications and Garware Hi-Tech 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 Paramount Communications with a short position of Garware Hi-Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Communications and Garware Hi-Tech.
Diversification Opportunities for Paramount Communications and Garware Hi-Tech
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Paramount and Garware is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit and Garware Hi Tech Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garware Hi Tech and Paramount Communications 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 Paramount Communications Limited are associated (or correlated) with Garware Hi-Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garware Hi Tech has no effect on the direction of Paramount Communications i.e., Paramount Communications and Garware Hi-Tech go up and down completely randomly.
Pair Corralation between Paramount Communications and Garware Hi-Tech
Assuming the 90 days trading horizon Paramount Communications Limited is expected to under-perform the Garware Hi-Tech. But the stock apears to be less risky and, when comparing its historical volatility, Paramount Communications Limited is 1.39 times less risky than Garware Hi-Tech. The stock trades about -0.11 of its potential returns per unit of risk. The Garware Hi Tech Films is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 348,255 in Garware Hi Tech Films on November 28, 2024 and sell it today you would earn a total of 57,720 from holding Garware Hi Tech Films or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paramount Communications Limit vs. Garware Hi Tech Films
Performance |
| Timeline |
| Paramount Communications |
| Garware Hi Tech |
Paramount Communications and Garware Hi-Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paramount Communications and Garware Hi-Tech
The main advantage of trading using opposite Paramount Communications and Garware Hi-Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Communications position performs unexpectedly, Garware Hi-Tech 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 Garware Hi-Tech will offset losses from the drop in Garware Hi-Tech's long position.The idea behind Paramount Communications Limited and Garware Hi Tech Films 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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