Correlation Between Bharti Airtel and Niraj Ispat

Can any of the company-specific risk be diversified away by investing in both Bharti Airtel and Niraj Ispat 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 Niraj Ispat 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 Niraj Ispat Industries, you can compare the effects of market volatilities on Bharti Airtel and Niraj Ispat 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 Niraj Ispat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharti Airtel and Niraj Ispat.

Diversification Opportunities for Bharti Airtel and Niraj Ispat

-0.2

Correlation Coefficient

Bharti Airtel  Niraj Ispat

Good diversification

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

Pair Corralation between Bharti Airtel and Niraj Ispat

Assuming the 90 days trading horizon Bharti Airtel is expected to generate 2.59 times less return on investment than Niraj Ispat. But when comparing it to its historical volatility, Bharti Airtel Limited is 1.11 times less risky than Niraj Ispat. It trades about 0.06 of its potential returns per unit of risk. Niraj Ispat Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,140  in Niraj Ispat Industries on September 3, 2024 and sell it today you would earn a total of  2,302  from holding Niraj Ispat Industries or generate 12.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Bharti Airtel Limited  vs.  Niraj Ispat Industries

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Niraj Ispat Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Niraj Ispat Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Niraj Ispat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bharti Airtel and Niraj Ispat

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

The idea behind Bharti Airtel Limited and Niraj Ispat Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.