Correlation Between Diamond Power and Suzlon Energy

Can any of the company-specific risk be diversified away by investing in both Diamond Power and Suzlon Energy 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 Suzlon Energy 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 Suzlon Energy Limited, you can compare the effects of market volatilities on Diamond Power and Suzlon Energy 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 Suzlon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Power and Suzlon Energy.

Diversification Opportunities for Diamond Power and Suzlon Energy

0.91

Correlation Coefficient

Diamond Power  Suzlon Energy

Almost no diversification

The 3 months correlation between Diamond and Suzlon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Power Infrastructure and Suzlon Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzlon Energy Limited 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 Suzlon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzlon Energy Limited has no effect on the direction of Diamond Power i.e., Diamond Power and Suzlon Energy go up and down completely randomly.

Pair Corralation between Diamond Power and Suzlon Energy

Assuming the 90 days trading horizon Diamond Power Infrastructure is expected to generate 1.5 times more return on investment than Suzlon Energy. However, Diamond Power is 1.5 times more volatile than Suzlon Energy Limited. It trades about 0.13 of its potential returns per unit of risk. Suzlon Energy Limited is currently generating about 0.14 per unit of risk. If you would invest  1,950  in Diamond Power Infrastructure on December 5, 2024 and sell it today you would earn a total of  6,802  from holding Diamond Power Infrastructure or generate 348.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Diamond Power Infrastructure  vs.  Suzlon Energy Limited

Diamond Power Infras

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Power Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Suzlon Energy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suzlon Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Diamond Power and Suzlon Energy

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

The idea behind Diamond Power Infrastructure and Suzlon Energy 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.