Correlation Between Bharti Airtel and Aarey Drugs

Can any of the company-specific risk be diversified away by investing in both Bharti Airtel and Aarey Drugs 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 Bharti Airtel and Aarey Drugs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bharti Airtel Limited and Aarey Drugs Pharmaceuticals, you can compare the effects of market volatilities on Bharti Airtel and Aarey Drugs 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 Bharti Airtel with a short position of Aarey Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharti Airtel and Aarey Drugs.

Diversification Opportunities for Bharti Airtel and Aarey Drugs

0.34

Correlation Coefficient

Bharti Airtel  Aarey Drugs

Weak diversification

The 3 months correlation between Bharti and Aarey is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bharti Airtel Limited and Aarey Drugs Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarey Drugs Pharmace and Bharti Airtel 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 Bharti Airtel Limited are associated (or correlated) with Aarey Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarey Drugs Pharmace has no effect on the direction of Bharti Airtel i.e., Bharti Airtel and Aarey Drugs go up and down completely randomly.

Pair Corralation between Bharti Airtel and Aarey Drugs

Assuming the 90 days trading horizon Bharti Airtel Limited is expected to generate 0.56 times more return on investment than Aarey Drugs. However, Bharti Airtel Limited is 1.77 times less risky than Aarey Drugs. It trades about 0.06 of its potential returns per unit of risk. Aarey Drugs Pharmaceuticals is currently generating about -0.07 per unit of risk. If you would invest  154,720  in Bharti Airtel Limited on September 5, 2024 and sell it today you would earn a total of  7,335  from holding Bharti Airtel Limited or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bharti Airtel Limited  vs.  Aarey Drugs Pharmaceuticals

Bharti Airtel Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bharti Airtel Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aarey Drugs Pharmace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarey Drugs Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bharti Airtel and Aarey Drugs

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

The idea behind Bharti Airtel Limited and Aarey Drugs Pharmaceuticals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.