Correlation Between Emkay Global and India Glycols

Can any of the company-specific risk be diversified away by investing in both Emkay Global and India Glycols 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 Emkay Global and India Glycols into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emkay Global Financial and India Glycols Limited, you can compare the effects of market volatilities on Emkay Global and India Glycols 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 Emkay Global with a short position of India Glycols. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emkay Global and India Glycols.

Diversification Opportunities for Emkay Global and India Glycols

0.48

Correlation Coefficient

Emkay Global  India Glycols

Very weak diversification

The 3 months correlation between Emkay and India is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Emkay Global Financial and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols Limited and Emkay Global 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 Emkay Global Financial are associated (or correlated) with India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of Emkay Global i.e., Emkay Global and India Glycols go up and down completely randomly.

Pair Corralation between Emkay Global and India Glycols

Assuming the 90 days trading horizon Emkay Global Financial is expected to generate 0.76 times more return on investment than India Glycols. However, Emkay Global Financial is 1.31 times less risky than India Glycols. It trades about 0.07 of its potential returns per unit of risk. India Glycols Limited is currently generating about 0.04 per unit of risk. If you would invest  26,160  in Emkay Global Financial on October 24, 2024 and sell it today you would earn a total of  2,375  from holding Emkay Global Financial or generate 9.08% return on investment over 90 days.

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

Emkay Global Financial  vs.  India Glycols Limited

Emkay Global Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emkay Global Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward-looking signals, Emkay Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

India Glycols Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, India Glycols may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Emkay Global and India Glycols

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

The idea behind Emkay Global Financial and India Glycols 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.