Correlation Between Engineers India and Indian Card

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

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

Diversification Opportunities for Engineers India and Indian Card

0.23

Correlation Coefficient

Engineers India  Indian Card

Modest diversification

The 3 months correlation between Engineers and Indian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and Indian Card Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Card Clothing and Engineers India 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 Engineers India Limited are associated (or correlated) with Indian Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Card Clothing has no effect on the direction of Engineers India i.e., Engineers India and Indian Card go up and down completely randomly.

Pair Corralation between Engineers India and Indian Card

Assuming the 90 days trading horizon Engineers India is expected to generate 7.13 times less return on investment than Indian Card. But when comparing it to its historical volatility, Engineers India Limited is 1.46 times less risky than Indian Card. It trades about 0.02 of its potential returns per unit of risk. Indian Card Clothing is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  25,245  in Indian Card Clothing on October 22, 2024 and sell it today you would earn a total of  6,420  from holding Indian Card Clothing or generate 25.43% return on investment over 90 days.

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

Engineers India Limited  vs.  Indian Card Clothing

Engineers India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engineers India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Engineers India is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Indian Card Clothing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Card Clothing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Indian Card exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engineers India and Indian Card

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

The idea behind Engineers India Limited and Indian Card Clothing 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.