Correlation Between Dodla Dairy and Spencers Retail

Can any of the company-specific risk be diversified away by investing in both Dodla Dairy and Spencers Retail 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 Dodla Dairy and Spencers Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dodla Dairy Limited and Spencers Retail Limited, you can compare the effects of market volatilities on Dodla Dairy and Spencers Retail 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 Dodla Dairy with a short position of Spencers Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodla Dairy and Spencers Retail.

Diversification Opportunities for Dodla Dairy and Spencers Retail

0.22

Correlation Coefficient

Dodla Dairy  Spencers Retail

Modest diversification

The 3 months correlation between Dodla and Spencers is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dodla Dairy Limited and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail and Dodla Dairy 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 Dodla Dairy Limited are associated (or correlated) with Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Dodla Dairy i.e., Dodla Dairy and Spencers Retail go up and down completely randomly.

Pair Corralation between Dodla Dairy and Spencers Retail

Assuming the 90 days trading horizon Dodla Dairy Limited is expected to under-perform the Spencers Retail. But the stock apears to be less risky and, when comparing its historical volatility, Dodla Dairy Limited is 1.49 times less risky than Spencers Retail. The stock trades about -0.11 of its potential returns per unit of risk. The Spencers Retail Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,001  in Spencers Retail Limited on October 26, 2024 and sell it today you would lose (686.00) from holding Spencers Retail Limited or give up 7.62% of portfolio value over 90 days.

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

Dodla Dairy Limited  vs.  Spencers Retail Limited

Dodla Dairy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodla Dairy Limited 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 fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Spencers Retail is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dodla Dairy and Spencers Retail

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

The idea behind Dodla Dairy Limited and Spencers Retail 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.