Correlation Between BAG Films and Gangotri Textiles

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

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

Diversification Opportunities for BAG Films and Gangotri Textiles

0.2

Correlation Coefficient

BAG Films  Gangotri Textiles

Modest diversification

The 3 months correlation between BAG and Gangotri is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BAG Films and and Gangotri Textiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gangotri Textiles and BAG Films 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 BAG Films and are associated (or correlated) with Gangotri Textiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gangotri Textiles has no effect on the direction of BAG Films i.e., BAG Films and Gangotri Textiles go up and down completely randomly.

Pair Corralation between BAG Films and Gangotri Textiles

Assuming the 90 days trading horizon BAG Films and is expected to generate 1.81 times more return on investment than Gangotri Textiles. However, BAG Films is 1.81 times more volatile than Gangotri Textiles Limited. It trades about 0.32 of its potential returns per unit of risk. Gangotri Textiles Limited is currently generating about -0.12 per unit of risk. If you would invest  924.00  in BAG Films and on September 23, 2024 and sell it today you would earn a total of  231.00  from holding BAG Films and or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

BAG Films and  vs.  Gangotri Textiles Limited

BAG Films

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BAG Films and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, BAG Films displayed solid returns over the last few months and may actually be approaching a breakup point.

Gangotri Textiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gangotri Textiles Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BAG Films and Gangotri Textiles

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

The idea behind BAG Films and and Gangotri Textiles 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.