Correlation Between Akums Drugs and IG Petrochemicals

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

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

Diversification Opportunities for Akums Drugs and IG Petrochemicals

0.03

Correlation Coefficient

Akums Drugs  IG Petrochemicals

Significant diversification

The 3 months correlation between Akums and IGPL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Akums Drugs and and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and Akums 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 Akums Drugs and 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 Akums Drugs i.e., Akums Drugs and IG Petrochemicals go up and down completely randomly.

Pair Corralation between Akums Drugs and IG Petrochemicals

Assuming the 90 days trading horizon Akums Drugs and is expected to under-perform the IG Petrochemicals. In addition to that, Akums Drugs is 1.51 times more volatile than IG Petrochemicals Limited. It trades about -0.04 of its total potential returns per unit of risk. IG Petrochemicals Limited is currently generating about 0.02 per unit of volatility. If you would invest  49,999  in IG Petrochemicals Limited on October 4, 2024 and sell it today you would earn a total of  8,061  from holding IG Petrochemicals Limited or generate 16.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	21.19%
Values	Daily Returns

Akums Drugs and  vs.  IG Petrochemicals Limited

Akums Drugs

Risk-Adjusted Performance

0 of 100

Very Weak

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

IG Petrochemicals

Risk-Adjusted Performance

1 of 100

Very Weak

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

Pair Trading with Akums Drugs and IG Petrochemicals

The main advantage of trading using opposite Akums Drugs and IG Petrochemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akums Drugs 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 Akums Drugs and 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..