Correlation Between Alkali Metals and Gillette India

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

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

Diversification Opportunities for Alkali Metals and Gillette India

0.03

Correlation Coefficient

Alkali Metals  Gillette India

Significant diversification

The 3 months correlation between Alkali and Gillette is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Gillette India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gillette India and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Gillette India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gillette India has no effect on the direction of Alkali Metals i.e., Alkali Metals and Gillette India go up and down completely randomly.

Pair Corralation between Alkali Metals and Gillette India

Assuming the 90 days trading horizon Alkali Metals Limited is expected to under-perform the Gillette India. But the stock apears to be less risky and, when comparing its historical volatility, Alkali Metals Limited is 1.45 times less risky than Gillette India. The stock trades about -0.02 of its potential returns per unit of risk. The Gillette India Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,017,009  in Gillette India Limited on October 7, 2024 and sell it today you would lose (27,154) from holding Gillette India Limited or give up 2.67% of portfolio value over 90 days.

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

Alkali Metals Limited  vs.  Gillette India Limited

Alkali Metals Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Gillette India

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gillette India unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and Gillette India

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

The idea behind Alkali Metals Limited and Gillette India 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.