Correlation Between Associated Alcohols and India Glycols

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

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

Diversification Opportunities for Associated Alcohols and India Glycols

0.47

Correlation Coefficient

Associated Alcohols  India Glycols

Very weak diversification

The 3 months correlation between Associated and India is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols Limited and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and India Glycols go up and down completely randomly.

Pair Corralation between Associated Alcohols and India Glycols

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 0.93 times more return on investment than India Glycols. However, Associated Alcohols Breweries is 1.08 times less risky than India Glycols. It trades about 0.14 of its potential returns per unit of risk. India Glycols Limited is currently generating about -0.07 per unit of risk. If you would invest  95,075  in Associated Alcohols Breweries on October 11, 2024 and sell it today you would earn a total of  22,580  from holding Associated Alcohols Breweries or generate 23.75% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  India Glycols Limited

Associated Alcohols

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Associated Alcohols and India Glycols

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

The idea behind Associated Alcohols Breweries and India Glycols 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.