Correlation Between Electrosteel Castings and Chemcon Speciality

Can any of the company-specific risk be diversified away by investing in both Electrosteel Castings and Chemcon Speciality 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 Chemcon Speciality 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 Chemcon Speciality Chemicals, you can compare the effects of market volatilities on Electrosteel Castings and Chemcon Speciality 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 Chemcon Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrosteel Castings and Chemcon Speciality.

Diversification Opportunities for Electrosteel Castings and Chemcon Speciality

0.94

Correlation Coefficient

Electrosteel Castings  Chemcon Speciality

Almost no diversification

The 3 months correlation between Electrosteel and Chemcon is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Chemcon Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemcon Speciality 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 Chemcon Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemcon Speciality has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Chemcon Speciality go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Chemcon Speciality

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to under-perform the Chemcon Speciality. In addition to that, Electrosteel Castings is 2.13 times more volatile than Chemcon Speciality Chemicals. It trades about -0.21 of its total potential returns per unit of risk. Chemcon Speciality Chemicals is currently generating about -0.15 per unit of volatility. If you would invest  25,885  in Chemcon Speciality Chemicals on October 13, 2024 and sell it today you would lose (3,672) from holding Chemcon Speciality Chemicals or give up 14.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Electrosteel Castings Limited  vs.  Chemcon Speciality Chemicals

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 uncertain performance in the last few months, the Stock's basic 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.

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Electrosteel Castings and Chemcon Speciality

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

The idea behind Electrosteel Castings Limited and Chemcon Speciality Chemicals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.