Correlation Between Dodla Dairy and Western India

Can any of the company-specific risk be diversified away by investing in both Dodla Dairy and Western India 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 Western India 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 The Western India, you can compare the effects of market volatilities on Dodla Dairy and Western India 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 Western India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodla Dairy and Western India.

Diversification Opportunities for Dodla Dairy and Western India

0.31

Correlation Coefficient

Dodla Dairy  Western India

Weak diversification

The 3 months correlation between Dodla and Western is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dodla Dairy Limited and The Western India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western India 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 Western India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western India has no effect on the direction of Dodla Dairy i.e., Dodla Dairy and Western India go up and down completely randomly.

Pair Corralation between Dodla Dairy and Western India

Assuming the 90 days trading horizon Dodla Dairy Limited is expected to under-perform the Western India. But the stock apears to be less risky and, when comparing its historical volatility, Dodla Dairy Limited is 1.72 times less risky than Western India. The stock trades about -0.1 of its potential returns per unit of risk. The The Western India is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  22,103  in The Western India on October 8, 2024 and sell it today you would earn a total of  1,815  from holding The Western India or generate 8.21% return on investment over 90 days.

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

Dodla Dairy Limited  vs.  The Western India

Dodla Dairy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dodla Dairy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Dodla Dairy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Western India

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Western India are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Western India unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dodla Dairy and Western India

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

The idea behind Dodla Dairy Limited and The Western India 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.