Correlation Between Engineers India and Som Distilleries

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

Diversification Opportunities for Engineers India and Som Distilleries

0.72

Correlation Coefficient

Engineers India  Som Distilleries

Poor diversification

The 3 months correlation between Engineers and Som is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and Som Distilleries Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Som Distilleries Bre 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 Som Distilleries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Som Distilleries Bre has no effect on the direction of Engineers India i.e., Engineers India and Som Distilleries go up and down completely randomly.

Pair Corralation between Engineers India and Som Distilleries

Assuming the 90 days trading horizon Engineers India is expected to generate 29.2 times less return on investment than Som Distilleries. But when comparing it to its historical volatility, Engineers India Limited is 17.23 times less risky than Som Distilleries. It trades about 0.03 of its potential returns per unit of risk. Som Distilleries Breweries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,978  in Som Distilleries Breweries on October 5, 2024 and sell it today you would lose (346.00) from holding Som Distilleries Breweries or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Engineers India Limited  vs.  Som Distilleries Breweries

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

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

Som Distilleries Bre

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Som Distilleries Breweries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Som Distilleries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Engineers India and Som Distilleries

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

The idea behind Engineers India Limited and Som Distilleries Breweries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.