Correlation Between Embassy Office and Dalmia Bharat

Can any of the company-specific risk be diversified away by investing in both Embassy Office and Dalmia Bharat 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 Embassy Office and Dalmia Bharat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embassy Office Parks and Dalmia Bharat Limited, you can compare the effects of market volatilities on Embassy Office and Dalmia Bharat 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 Embassy Office with a short position of Dalmia Bharat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Office and Dalmia Bharat.

Diversification Opportunities for Embassy Office and Dalmia Bharat

-0.09

Correlation Coefficient

Embassy Office  Dalmia Bharat

Good diversification

The 3 months correlation between Embassy and Dalmia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and Dalmia Bharat Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalmia Bharat Limited and Embassy Office 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 Embassy Office Parks are associated (or correlated) with Dalmia Bharat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalmia Bharat Limited has no effect on the direction of Embassy Office i.e., Embassy Office and Dalmia Bharat go up and down completely randomly.

Pair Corralation between Embassy Office and Dalmia Bharat

Assuming the 90 days trading horizon Embassy Office Parks is expected to generate 0.71 times more return on investment than Dalmia Bharat. However, Embassy Office Parks is 1.4 times less risky than Dalmia Bharat. It trades about 0.06 of its potential returns per unit of risk. Dalmia Bharat Limited is currently generating about 0.01 per unit of risk. If you would invest  27,729  in Embassy Office Parks on October 24, 2024 and sell it today you would earn a total of  9,677  from holding Embassy Office Parks or generate 34.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.6%
Values	Daily Returns

Embassy Office Parks  vs.  Dalmia Bharat Limited

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Dalmia Bharat Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dalmia Bharat Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dalmia Bharat is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Embassy Office and Dalmia Bharat

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

The idea behind Embassy Office Parks and Dalmia Bharat Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.