Correlation Between TRON and IG Petrochemicals
Can any of the company-specific risk be diversified away by investing in both TRON and IG 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 TRON and IG Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRON and IG Petrochemicals Limited, you can compare the effects of market volatilities on TRON and IG 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 TRON with a short position of IG Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and IG Petrochemicals.
Diversification Opportunities for TRON and IG Petrochemicals
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between TRON and IGPL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding TRON and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and TRON 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 TRON are associated (or correlated) with IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of TRON i.e., TRON and IG Petrochemicals go up and down completely randomly.
Pair Corralation between TRON and IG Petrochemicals
Assuming the 90 days trading horizon TRON is expected to under-perform the IG Petrochemicals. In addition to that, TRON is 1.91 times more volatile than IG Petrochemicals Limited. It trades about -0.15 of its total potential returns per unit of risk. IG Petrochemicals Limited is currently generating about -0.26 per unit of volatility. If you would invest 58,790 in IG Petrochemicals Limited on October 11, 2024 and sell it today you would lose (6,755) from holding IG Petrochemicals Limited or give up 11.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
TRON vs. IG Petrochemicals Limited
Performance |
| Timeline |
| TRON |
| IG Petrochemicals |
TRON and IG Petrochemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRON and IG Petrochemicals
The main advantage of trading using opposite TRON and IG Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON position performs unexpectedly, IG 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 IG Petrochemicals will offset losses from the drop in IG Petrochemicals' long position.The idea behind TRON and IG Petrochemicals Limited 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.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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