Correlation Between Shipping and Elgi Rubber

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

Diversification Opportunities for Shipping and Elgi Rubber

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Shipping and Elgi is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shipping and Elgi Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elgi Rubber and Shipping 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 Shipping are associated (or correlated) with Elgi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elgi Rubber has no effect on the direction of Shipping i.e., Shipping and Elgi Rubber go up and down completely randomly.

Pair Corralation between Shipping and Elgi Rubber

Assuming the 90 days trading horizon Shipping is expected to under-perform the Elgi Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Shipping is 1.53 times less risky than Elgi Rubber. The stock trades about -0.06 of its potential returns per unit of risk. The Elgi Rubber is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,900  in Elgi Rubber on September 3, 2024 and sell it today you would earn a total of  347.00  from holding Elgi Rubber or generate 3.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Shipping  vs.  Elgi Rubber

 Performance 
       Timeline  
Shipping 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Elgi Rubber 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Elgi Rubber may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shipping and Elgi Rubber Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shipping and Elgi Rubber

The main advantage of trading using opposite Shipping and Elgi Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shipping position performs unexpectedly, Elgi Rubber 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 Elgi Rubber will offset losses from the drop in Elgi Rubber's long position.
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The idea behind Shipping and Elgi Rubber 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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