Correlation Between Chambal Fertilizers and Industrial Investment

Can any of the company-specific risk be diversified away by investing in both Chambal Fertilizers and Industrial Investment 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 Chambal Fertilizers and Industrial Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chambal Fertilizers Chemicals and Industrial Investment Trust, you can compare the effects of market volatilities on Chambal Fertilizers and Industrial Investment 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 Chambal Fertilizers with a short position of Industrial Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chambal Fertilizers and Industrial Investment.

Diversification Opportunities for Chambal Fertilizers and Industrial Investment

0.38

Correlation Coefficient

Chambal Fertilizers  Industrial Investment

Weak diversification

The 3 months correlation between Chambal and Industrial is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chambal Fertilizers Chemicals and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and Chambal Fertilizers 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 Chambal Fertilizers Chemicals are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Chambal Fertilizers i.e., Chambal Fertilizers and Industrial Investment go up and down completely randomly.

Pair Corralation between Chambal Fertilizers and Industrial Investment

Assuming the 90 days trading horizon Chambal Fertilizers Chemicals is expected to generate 0.58 times more return on investment than Industrial Investment. However, Chambal Fertilizers Chemicals is 1.72 times less risky than Industrial Investment. It trades about -0.27 of its potential returns per unit of risk. Industrial Investment Trust is currently generating about -0.35 per unit of risk. If you would invest  53,150  in Chambal Fertilizers Chemicals on October 15, 2024 and sell it today you would lose (5,010) from holding Chambal Fertilizers Chemicals or give up 9.43% of portfolio value over 90 days.

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

Chambal Fertilizers Chemicals  vs.  Industrial Investment Trust

Chambal Fertilizers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chambal Fertilizers Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chambal Fertilizers is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Industrial Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Industrial Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chambal Fertilizers and Industrial Investment

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

The idea behind Chambal Fertilizers Chemicals and Industrial Investment Trust 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.