Correlation Between BEL Small and Titan Cement

Can any of the company-specific risk be diversified away by investing in both BEL Small and Titan Cement 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 BEL Small and Titan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BEL Small and Titan Cement International, you can compare the effects of market volatilities on BEL Small and Titan Cement 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 BEL Small with a short position of Titan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of BEL Small and Titan Cement.

Diversification Opportunities for BEL Small and Titan Cement

-0.76

Correlation Coefficient

BEL Small  Titan Cement

Pay attention - limited upside

The 3 months correlation between BEL and Titan is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding BEL Small and Titan Cement International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Cement Interna and BEL Small 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 BEL Small are associated (or correlated) with Titan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Cement Interna has no effect on the direction of BEL Small i.e., BEL Small and Titan Cement go up and down completely randomly.

Pair Corralation between BEL Small and Titan Cement

Assuming the 90 days trading horizon BEL Small is expected to generate 0.94 times more return on investment than Titan Cement. However, BEL Small is 1.06 times less risky than Titan Cement. It trades about 0.43 of its potential returns per unit of risk. Titan Cement International is currently generating about 0.05 per unit of risk. If you would invest  803,893  in BEL Small on October 9, 2024 and sell it today you would earn a total of  60,769  from holding BEL Small or generate 7.56% return on investment over 90 days.

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

BEL Small  vs.  Titan Cement International

Pair Trading with BEL Small and Titan Cement

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

The idea behind BEL Small and Titan Cement International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.