Correlation Between Dodla Dairy and Suzlon Energy

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

Diversification Opportunities for Dodla Dairy and Suzlon Energy

0.56

Correlation Coefficient

Dodla Dairy  Suzlon Energy

Very weak diversification

The 3 months correlation between Dodla and Suzlon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dodla Dairy Limited 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 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 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 Dodla Dairy i.e., Dodla Dairy and Suzlon Energy go up and down completely randomly.

Pair Corralation between Dodla Dairy and Suzlon Energy

Assuming the 90 days trading horizon Dodla Dairy Limited is expected to generate 0.78 times more return on investment than Suzlon Energy. However, Dodla Dairy Limited is 1.28 times less risky than Suzlon Energy. It trades about 0.03 of its potential returns per unit of risk. Suzlon Energy Limited is currently generating about -0.11 per unit of risk. If you would invest  117,975  in Dodla Dairy Limited on October 10, 2024 and sell it today you would earn a total of  3,015  from holding Dodla Dairy Limited or generate 2.56% return on investment over 90 days.

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

Dodla Dairy Limited  vs.  Suzlon Energy Limited

Dodla Dairy Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dodla Dairy Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Dodla Dairy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Suzlon Energy Limited

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dodla Dairy and Suzlon Energy

The main advantage of trading using opposite Dodla Dairy and Suzlon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodla Dairy 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 Dodla Dairy Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.