Correlation Between Electrosteel Castings and Biofil Chemicals

Can any of the company-specific risk be diversified away by investing in both Electrosteel Castings and Biofil Chemicals 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 Electrosteel Castings and Biofil Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Electrosteel Castings Limited and Biofil Chemicals Pharmaceuticals, you can compare the effects of market volatilities on Electrosteel Castings and Biofil Chemicals 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 Electrosteel Castings with a short position of Biofil Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrosteel Castings and Biofil Chemicals.

Diversification Opportunities for Electrosteel Castings and Biofil Chemicals

0.96

Correlation Coefficient

Electrosteel Castings  Biofil Chemicals

Almost no diversification

The 3 months correlation between Electrosteel and Biofil is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Biofil Chemicals Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofil Chemicals Pha and Electrosteel Castings 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 Electrosteel Castings Limited are associated (or correlated) with Biofil Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofil Chemicals Pha has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Biofil Chemicals go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Biofil Chemicals

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to generate 0.97 times more return on investment than Biofil Chemicals. However, Electrosteel Castings Limited is 1.03 times less risky than Biofil Chemicals. It trades about 0.11 of its potential returns per unit of risk. Biofil Chemicals Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  3,767  in Electrosteel Castings Limited on September 20, 2024 and sell it today you would earn a total of  11,374  from holding Electrosteel Castings Limited or generate 301.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.59%
Values	Daily Returns

Electrosteel Castings Limited  vs.  Biofil Chemicals Pharmaceutica

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Biofil Chemicals Pha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofil Chemicals Pharmaceuticals 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 technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Electrosteel Castings and Biofil Chemicals

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

The idea behind Electrosteel Castings Limited and Biofil Chemicals Pharmaceuticals 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.