Correlation Between Aarey Drugs and Cantabil Retail

Can any of the company-specific risk be diversified away by investing in both Aarey Drugs and Cantabil Retail 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 Aarey Drugs and Cantabil Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aarey Drugs Pharmaceuticals and Cantabil Retail India, you can compare the effects of market volatilities on Aarey Drugs and Cantabil Retail 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 Aarey Drugs with a short position of Cantabil Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarey Drugs and Cantabil Retail.

Diversification Opportunities for Aarey Drugs and Cantabil Retail

0.54

Correlation Coefficient

Aarey Drugs  Cantabil Retail

Very weak diversification

The 3 months correlation between Aarey and Cantabil is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aarey Drugs Pharmaceuticals and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India and Aarey Drugs 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 Aarey Drugs Pharmaceuticals are associated (or correlated) with Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of Aarey Drugs i.e., Aarey Drugs and Cantabil Retail go up and down completely randomly.

Pair Corralation between Aarey Drugs and Cantabil Retail

Assuming the 90 days trading horizon Aarey Drugs Pharmaceuticals is expected to under-perform the Cantabil Retail. But the stock apears to be less risky and, when comparing its historical volatility, Aarey Drugs Pharmaceuticals is 1.26 times less risky than Cantabil Retail. The stock trades about -0.24 of its potential returns per unit of risk. The Cantabil Retail India is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  28,783  in Cantabil Retail India on December 28, 2024 and sell it today you would lose (1,733) from holding Cantabil Retail India or give up 6.02% of portfolio value over 90 days.

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

Aarey Drugs Pharmaceuticals  vs.  Cantabil Retail India

Aarey Drugs Pharmace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aarey Drugs Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cantabil Retail India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cantabil Retail India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aarey Drugs and Cantabil Retail

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

The idea behind Aarey Drugs Pharmaceuticals and Cantabil Retail India 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.