Correlation Between Choice International and Edelweiss Financial

Can any of the company-specific risk be diversified away by investing in both Choice International and Edelweiss Financial 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 Choice International and Edelweiss Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Choice International Limited and Edelweiss Financial Services, you can compare the effects of market volatilities on Choice International and Edelweiss Financial 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 Choice International with a short position of Edelweiss Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice International and Edelweiss Financial.

Diversification Opportunities for Choice International and Edelweiss Financial

-0.37

Correlation Coefficient

Choice International  Edelweiss Financial

Very good diversification

The 3 months correlation between Choice and Edelweiss is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Choice International Limited and Edelweiss Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edelweiss Financial and Choice International 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 Choice International Limited are associated (or correlated) with Edelweiss Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edelweiss Financial has no effect on the direction of Choice International i.e., Choice International and Edelweiss Financial go up and down completely randomly.

Pair Corralation between Choice International and Edelweiss Financial

Assuming the 90 days trading horizon Choice International Limited is expected to generate 0.47 times more return on investment than Edelweiss Financial. However, Choice International Limited is 2.13 times less risky than Edelweiss Financial. It trades about 0.16 of its potential returns per unit of risk. Edelweiss Financial Services is currently generating about 0.07 per unit of risk. If you would invest  44,390  in Choice International Limited on September 2, 2024 and sell it today you would earn a total of  8,640  from holding Choice International Limited or generate 19.46% return on investment over 90 days.

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

Choice International Limited  vs.  Edelweiss Financial Services

Choice International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice International Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Choice International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Edelweiss Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edelweiss Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Edelweiss Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice International and Edelweiss Financial

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

The idea behind Choice International Limited and Edelweiss Financial Services 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.