Correlation Between 20 Microns and Golden Tobacco

Can any of the company-specific risk be diversified away by investing in both 20 Microns and Golden Tobacco 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 20 Microns and Golden Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 20 Microns Limited and Golden Tobacco Limited, you can compare the effects of market volatilities on 20 Microns and Golden Tobacco 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 20 Microns with a short position of Golden Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of 20 Microns and Golden Tobacco.

Diversification Opportunities for 20 Microns and Golden Tobacco

0.38

Correlation Coefficient

20 Microns  Golden Tobacco

Weak diversification

The 3 months correlation between 20MICRONS and Golden is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding 20 Microns Limited and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and 20 Microns 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 20 Microns Limited are associated (or correlated) with Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of 20 Microns i.e., 20 Microns and Golden Tobacco go up and down completely randomly.

Pair Corralation between 20 Microns and Golden Tobacco

Assuming the 90 days trading horizon 20 Microns Limited is expected to under-perform the Golden Tobacco. In addition to that, 20 Microns is 1.06 times more volatile than Golden Tobacco Limited. It trades about -0.09 of its total potential returns per unit of risk. Golden Tobacco Limited is currently generating about 0.02 per unit of volatility. If you would invest  4,199  in Golden Tobacco Limited on September 16, 2024 and sell it today you would earn a total of  36.00  from holding Golden Tobacco Limited or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

20 Microns Limited  vs.  Golden Tobacco Limited

20 Microns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 20 Microns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Golden Tobacco

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Tobacco Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with 20 Microns and Golden Tobacco

The main advantage of trading using opposite 20 Microns and Golden Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 20 Microns position performs unexpectedly, Golden Tobacco 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 Golden Tobacco will offset losses from the drop in Golden Tobacco's long position.

The idea behind 20 Microns Limited and Golden Tobacco 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.