Correlation Between Elgi Rubber and Shaily Engineering

Can any of the company-specific risk be diversified away by investing in both Elgi Rubber and Shaily Engineering 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 Elgi Rubber and Shaily Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elgi Rubber and Shaily Engineering Plastics, you can compare the effects of market volatilities on Elgi Rubber and Shaily Engineering 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 Elgi Rubber with a short position of Shaily Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elgi Rubber and Shaily Engineering.

Diversification Opportunities for Elgi Rubber and Shaily Engineering

0.03

Correlation Coefficient

Elgi Rubber  Shaily Engineering

Significant diversification

The 3 months correlation between Elgi and Shaily is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Elgi Rubber and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering and Elgi Rubber 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 Elgi Rubber are associated (or correlated) with Shaily Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaily Engineering has no effect on the direction of Elgi Rubber i.e., Elgi Rubber and Shaily Engineering go up and down completely randomly.

Pair Corralation between Elgi Rubber and Shaily Engineering

Assuming the 90 days trading horizon Elgi Rubber is expected to under-perform the Shaily Engineering. In addition to that, Elgi Rubber is 1.28 times more volatile than Shaily Engineering Plastics. It trades about -0.17 of its total potential returns per unit of risk. Shaily Engineering Plastics is currently generating about 0.09 per unit of volatility. If you would invest  129,735  in Shaily Engineering Plastics on November 29, 2024 and sell it today you would earn a total of  22,085  from holding Shaily Engineering Plastics or generate 17.02% return on investment over 90 days.

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

Elgi Rubber  vs.  Shaily Engineering Plastics

Elgi Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elgi Rubber 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 fundamental drivers remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shaily Engineering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elgi Rubber and Shaily Engineering

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

The idea behind Elgi Rubber and Shaily Engineering Plastics 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.