Correlation Between Power Finance and Indian Renewable
Can any of the company-specific risk be diversified away by investing in both Power Finance and Indian Renewable 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 Power Finance and Indian Renewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Finance and Indian Renewable Energy, you can compare the effects of market volatilities on Power Finance and Indian Renewable 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 Power Finance with a short position of Indian Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and Indian Renewable.
Diversification Opportunities for Power Finance and Indian Renewable
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Power and Indian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and Indian Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Renewable Energy and Power Finance 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 Power Finance are associated (or correlated) with Indian Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Renewable Energy has no effect on the direction of Power Finance i.e., Power Finance and Indian Renewable go up and down completely randomly.
Pair Corralation between Power Finance and Indian Renewable
Assuming the 90 days trading horizon Power Finance is expected to generate 1.17 times more return on investment than Indian Renewable. However, Power Finance is 1.17 times more volatile than Indian Renewable Energy. It trades about 0.17 of its potential returns per unit of risk. Indian Renewable Energy is currently generating about -0.04 per unit of risk. If you would invest 45,574 in Power Finance on September 2, 2024 and sell it today you would earn a total of 3,956 from holding Power Finance or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Power Finance vs. Indian Renewable Energy
Performance |
| Timeline |
| Power Finance |
| Indian Renewable Energy |
Power Finance and Indian Renewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Finance and Indian Renewable
The main advantage of trading using opposite Power Finance and Indian Renewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance position performs unexpectedly, Indian Renewable 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 Indian Renewable will offset losses from the drop in Indian Renewable's long position.| Power Finance vs. State Bank of | Power Finance vs. Life Insurance | Power Finance vs. HDFC Bank Limited | Power Finance vs. ICICI Bank Limited |
| Indian Renewable vs. Bajaj Finance Limited | Indian Renewable vs. Indian Railway Finance | Indian Renewable vs. Power Finance | Indian Renewable vs. REC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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