Correlation Between Bodal Chemicals and Southern Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Bodal Chemicals and Southern Petrochemicals 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 Bodal Chemicals and Southern Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bodal Chemicals Limited and Southern Petrochemicals Industries, you can compare the effects of market volatilities on Bodal Chemicals and Southern Petrochemicals 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 Bodal Chemicals with a short position of Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodal Chemicals and Southern Petrochemicals.

Diversification Opportunities for Bodal Chemicals and Southern Petrochemicals

0.87

Correlation Coefficient

Bodal Chemicals  Southern Petrochemicals

Very poor diversification

The 3 months correlation between Bodal and Southern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bodal Chemicals Limited and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals and Bodal Chemicals 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 Bodal Chemicals Limited are associated (or correlated) with Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Bodal Chemicals i.e., Bodal Chemicals and Southern Petrochemicals go up and down completely randomly.

Pair Corralation between Bodal Chemicals and Southern Petrochemicals

Assuming the 90 days trading horizon Bodal Chemicals Limited is expected to under-perform the Southern Petrochemicals. But the stock apears to be less risky and, when comparing its historical volatility, Bodal Chemicals Limited is 1.26 times less risky than Southern Petrochemicals. The stock trades about -0.1 of its potential returns per unit of risk. The Southern Petrochemicals Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,313  in Southern Petrochemicals Industries on September 25, 2024 and sell it today you would earn a total of  4.00  from holding Southern Petrochemicals Industries or generate 0.05% return on investment over 90 days.

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

Bodal Chemicals Limited  vs.  Southern Petrochemicals Indust

Bodal Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodal Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bodal Chemicals and Southern Petrochemicals

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

The idea behind Bodal Chemicals Limited and Southern Petrochemicals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.