Correlation Between Bharat Road and Indian Metals

Can any of the company-specific risk be diversified away by investing in both Bharat Road and Indian Metals 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 Bharat Road and Indian Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bharat Road Network and Indian Metals Ferro, you can compare the effects of market volatilities on Bharat Road and Indian Metals 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 Bharat Road with a short position of Indian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharat Road and Indian Metals.

Diversification Opportunities for Bharat Road and Indian Metals

0.25

Correlation Coefficient

Bharat Road  Indian Metals

Modest diversification

The 3 months correlation between Bharat and Indian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bharat Road Network and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Bharat Road 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 Bharat Road Network are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Bharat Road i.e., Bharat Road and Indian Metals go up and down completely randomly.

Pair Corralation between Bharat Road and Indian Metals

Assuming the 90 days trading horizon Bharat Road Network is expected to generate 0.73 times more return on investment than Indian Metals. However, Bharat Road Network is 1.36 times less risky than Indian Metals. It trades about 0.2 of its potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.15 per unit of risk. If you would invest  4,335  in Bharat Road Network on September 25, 2024 and sell it today you would earn a total of  360.00  from holding Bharat Road Network or generate 8.3% return on investment over 90 days.

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

Bharat Road Network  vs.  Indian Metals Ferro

Bharat Road Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharat Road Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bharat Road is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Indian Metals Ferro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bharat Road and Indian Metals

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

The idea behind Bharat Road Network and Indian Metals Ferro 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.