Correlation Between Diamond Power and Sarthak Metals

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

By analyzing existing cross correlation between Diamond Power Infrastructure and Sarthak Metals Limited, you can compare the effects of market volatilities on Diamond Power and Sarthak 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 Diamond Power with a short position of Sarthak Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Power and Sarthak Metals.

Diversification Opportunities for Diamond Power and Sarthak Metals

-0.17

Correlation Coefficient

Diamond Power  Sarthak Metals

Good diversification

The 3 months correlation between Diamond and Sarthak is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Power Infrastructure and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals and Diamond Power 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 Diamond Power Infrastructure are associated (or correlated) with Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Diamond Power i.e., Diamond Power and Sarthak Metals go up and down completely randomly.

Pair Corralation between Diamond Power and Sarthak Metals

Assuming the 90 days trading horizon Diamond Power Infrastructure is expected to generate 32.71 times more return on investment than Sarthak Metals. However, Diamond Power is 32.71 times more volatile than Sarthak Metals Limited. It trades about 0.12 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about 0.03 per unit of risk. If you would invest  13,668  in Diamond Power Infrastructure on September 18, 2024 and sell it today you would earn a total of  2,737  from holding Diamond Power Infrastructure or generate 20.02% return on investment over 90 days.

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

Diamond Power Infrastructure  vs.  Sarthak Metals Limited

Diamond Power Infras

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Power Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sarthak Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sarthak Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sarthak Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Power and Sarthak Metals

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

The idea behind Diamond Power Infrastructure and Sarthak Metals Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.