Correlation Between Artistic Denim and Indus

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

By analyzing existing cross correlation between Artistic Denim Mills and Indus Motor, you can compare the effects of market volatilities on Artistic Denim and Indus 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 Artistic Denim with a short position of Indus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artistic Denim and Indus.

Diversification Opportunities for Artistic Denim and Indus

0.73

Correlation Coefficient

Artistic Denim  Indus

Poor diversification

The 3 months correlation between Artistic and Indus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Artistic Denim Mills and Indus Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Motor and Artistic Denim 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 Artistic Denim Mills are associated (or correlated) with Indus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Motor has no effect on the direction of Artistic Denim i.e., Artistic Denim and Indus go up and down completely randomly.

Pair Corralation between Artistic Denim and Indus

Assuming the 90 days trading horizon Artistic Denim Mills is expected to under-perform the Indus. In addition to that, Artistic Denim is 1.64 times more volatile than Indus Motor. It trades about -0.02 of its total potential returns per unit of risk. Indus Motor is currently generating about 0.18 per unit of volatility. If you would invest  115,058  in Indus Motor on October 3, 2024 and sell it today you would earn a total of  97,902  from holding Indus Motor or generate 85.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Artistic Denim Mills  vs.  Indus Motor

Artistic Denim Mills

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Artistic Denim Mills are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Artistic Denim sustained solid returns over the last few months and may actually be approaching a breakup point.

Indus Motor

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Indus Motor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Indus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Artistic Denim and Indus

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

The idea behind Artistic Denim Mills and Indus Motor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.