Correlation Between Centum Electronics and Gujarat Narmada

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

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

Diversification Opportunities for Centum Electronics and Gujarat Narmada

-0.21

Correlation Coefficient

Centum Electronics  Gujarat Narmada

Very good diversification

The 3 months correlation between Centum and Gujarat is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Centum Electronics Limited and Gujarat Narmada Valley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Narmada Valley and Centum Electronics 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 Centum Electronics Limited are associated (or correlated) with Gujarat Narmada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Narmada Valley has no effect on the direction of Centum Electronics i.e., Centum Electronics and Gujarat Narmada go up and down completely randomly.

Pair Corralation between Centum Electronics and Gujarat Narmada

Assuming the 90 days trading horizon Centum Electronics Limited is expected to generate 2.06 times more return on investment than Gujarat Narmada. However, Centum Electronics is 2.06 times more volatile than Gujarat Narmada Valley. It trades about 0.09 of its potential returns per unit of risk. Gujarat Narmada Valley is currently generating about -0.11 per unit of risk. If you would invest  179,830  in Centum Electronics Limited on October 9, 2024 and sell it today you would earn a total of  35,415  from holding Centum Electronics Limited or generate 19.69% return on investment over 90 days.

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

Centum Electronics Limited  vs.  Gujarat Narmada Valley

Centum Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centum Electronics Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Centum Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Narmada Valley 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Centum Electronics and Gujarat Narmada

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

The idea behind Centum Electronics Limited and Gujarat Narmada Valley 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.