Correlation Between Associated Alcohols and Indian Overseas

Can any of the company-specific risk be diversified away by investing in both Associated Alcohols and Indian Overseas 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 Indian Overseas 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 Indian Overseas Bank, you can compare the effects of market volatilities on Associated Alcohols and Indian Overseas 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 Indian Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and Indian Overseas.

Diversification Opportunities for Associated Alcohols and Indian Overseas

0.03

Correlation Coefficient

Associated Alcohols  Indian Overseas

Significant diversification

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

Pair Corralation between Associated Alcohols and Indian Overseas

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 0.84 times more return on investment than Indian Overseas. However, Associated Alcohols Breweries is 1.2 times less risky than Indian Overseas. It trades about 0.1 of its potential returns per unit of risk. Indian Overseas Bank is currently generating about 0.06 per unit of risk. If you would invest  38,915  in Associated Alcohols Breweries on October 23, 2024 and sell it today you would earn a total of  79,945  from holding Associated Alcohols Breweries or generate 205.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Associated Alcohols Breweries  vs.  Indian Overseas Bank

Associated Alcohols

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Indian Overseas Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Overseas Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Indian Overseas is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Associated Alcohols and Indian Overseas

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

The idea behind Associated Alcohols Breweries and Indian Overseas Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.