Correlation Between Export Development and Paint Chemicals

Can any of the company-specific risk be diversified away by investing in both Export Development and Paint Chemicals 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 Export Development and Paint Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Export Development Bank and Paint Chemicals Industries, you can compare the effects of market volatilities on Export Development and Paint Chemicals 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 Export Development with a short position of Paint Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Export Development and Paint Chemicals.

Diversification Opportunities for Export Development and Paint Chemicals

0.0

Correlation Coefficient

Export Development  Paint Chemicals

Pay attention - limited upside

The 3 months correlation between Export and Paint is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Export Development Bank and Paint Chemicals Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paint Chemicals Indu and Export Development 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 Export Development Bank are associated (or correlated) with Paint Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paint Chemicals Indu has no effect on the direction of Export Development i.e., Export Development and Paint Chemicals go up and down completely randomly.

Pair Corralation between Export Development and Paint Chemicals

Assuming the 90 days trading horizon Export Development Bank is expected to generate 3.57 times more return on investment than Paint Chemicals. However, Export Development is 3.57 times more volatile than Paint Chemicals Industries. It trades about 0.05 of its potential returns per unit of risk. Paint Chemicals Industries is currently generating about 0.07 per unit of risk. If you would invest  1,202  in Export Development Bank on October 7, 2024 and sell it today you would earn a total of  598.00  from holding Export Development Bank or generate 49.75% return on investment over 90 days.

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

Export Development Bank  vs.  Paint Chemicals Industries

Export Development Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development reported solid returns over the last few months and may actually be approaching a breakup point.

Paint Chemicals Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paint Chemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Paint Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Export Development and Paint Chemicals

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

The idea behind Export Development Bank and Paint Chemicals Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.