Correlation Between Electrosteel Castings and Cholamandalam Investment

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

Diversification Opportunities for Electrosteel Castings and Cholamandalam Investment

0.96

Correlation Coefficient

Electrosteel Castings  Cholamandalam Investment

Almost no diversification

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

Pair Corralation between Electrosteel Castings and Cholamandalam Investment

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to generate 1.59 times more return on investment than Cholamandalam Investment. However, Electrosteel Castings is 1.59 times more volatile than Cholamandalam Investment and. It trades about 0.1 of its potential returns per unit of risk. Cholamandalam Investment and is currently generating about 0.07 per unit of risk. If you would invest  3,743  in Electrosteel Castings Limited on September 26, 2024 and sell it today you would earn a total of  10,223  from holding Electrosteel Castings Limited or generate 273.12% 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.  Cholamandalam Investment and

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

Cholamandalam Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Electrosteel Castings and Cholamandalam Investment

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

The idea behind Electrosteel Castings Limited and Cholamandalam Investment and 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..