Correlation Between Blue Coast and Gujarat Fluorochemicals

Can any of the company-specific risk be diversified away by investing in both Blue Coast and Gujarat Fluorochemicals 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 Blue Coast and Gujarat Fluorochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Coast Hotels and Gujarat Fluorochemicals Limited, you can compare the effects of market volatilities on Blue Coast and Gujarat Fluorochemicals 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 Blue Coast with a short position of Gujarat Fluorochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Coast and Gujarat Fluorochemicals.

Diversification Opportunities for Blue Coast and Gujarat Fluorochemicals

-0.53

Correlation Coefficient

Blue Coast  Gujarat Fluorochemicals

Excellent diversification

The 3 months correlation between Blue and Gujarat is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals and Blue Coast 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 Blue Coast Hotels are associated (or correlated) with Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of Blue Coast i.e., Blue Coast and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between Blue Coast and Gujarat Fluorochemicals

Assuming the 90 days trading horizon Blue Coast Hotels is expected to generate 1.06 times more return on investment than Gujarat Fluorochemicals. However, Blue Coast is 1.06 times more volatile than Gujarat Fluorochemicals Limited. It trades about 0.15 of its potential returns per unit of risk. Gujarat Fluorochemicals Limited is currently generating about 0.05 per unit of risk. If you would invest  730.00  in Blue Coast Hotels on October 24, 2024 and sell it today you would earn a total of  1,807  from holding Blue Coast Hotels or generate 247.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.82%
Values	Daily Returns

Blue Coast Hotels  vs.  Gujarat Fluorochemicals Limite

Blue Coast Hotels

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Blue Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Gujarat Fluorochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Blue Coast and Gujarat Fluorochemicals

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

The idea behind Blue Coast Hotels and Gujarat Fluorochemicals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.