Correlation Between Shanthi Gears and Industrial Investment

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

Diversification Opportunities for Shanthi Gears and Industrial Investment

-0.86
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Shanthi and Industrial is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shanthi Gears Limited and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and Shanthi Gears 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 Shanthi Gears Limited are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Shanthi Gears i.e., Shanthi Gears and Industrial Investment go up and down completely randomly.

Pair Corralation between Shanthi Gears and Industrial Investment

Assuming the 90 days trading horizon Shanthi Gears Limited is expected to under-perform the Industrial Investment. In addition to that, Shanthi Gears is 1.04 times more volatile than Industrial Investment Trust. It trades about -0.27 of its total potential returns per unit of risk. Industrial Investment Trust is currently generating about 0.29 per unit of volatility. If you would invest  29,860  in Industrial Investment Trust on August 28, 2024 and sell it today you would earn a total of  7,790  from holding Industrial Investment Trust or generate 26.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shanthi Gears Limited  vs.  Industrial Investment Trust

 Performance 
       Timeline  
Shanthi Gears Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shanthi Gears Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Industrial Investment 

Risk-Adjusted Performance

29 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Shanthi Gears and Industrial Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shanthi Gears and Industrial Investment

The main advantage of trading using opposite Shanthi Gears and Industrial Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanthi Gears position performs unexpectedly, Industrial Investment 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 Industrial Investment will offset losses from the drop in Industrial Investment's long position.
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The idea behind Shanthi Gears Limited and Industrial Investment Trust 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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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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