Correlation Between Fertilizers and Gujarat Fluorochemicals

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

By analyzing existing cross correlation between Fertilizers and Chemicals and Gujarat Fluorochemicals Limited, you can compare the effects of market volatilities on Fertilizers and Gujarat Fluorochemicals 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 Fertilizers with a short position of Gujarat Fluorochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fertilizers and Gujarat Fluorochemicals.

Diversification Opportunities for Fertilizers and Gujarat Fluorochemicals

0.65

Correlation Coefficient

Fertilizers  Gujarat Fluorochemicals

Poor diversification

The 3 months correlation between Fertilizers and Gujarat is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fertilizers and Chemicals and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals and Fertilizers 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 Fertilizers and Chemicals are associated (or correlated) with Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of Fertilizers i.e., Fertilizers and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between Fertilizers and Gujarat Fluorochemicals

Assuming the 90 days trading horizon Fertilizers and Chemicals is expected to under-perform the Gujarat Fluorochemicals. In addition to that, Fertilizers is 1.34 times more volatile than Gujarat Fluorochemicals Limited. It trades about -0.18 of its total potential returns per unit of risk. Gujarat Fluorochemicals Limited is currently generating about -0.08 per unit of volatility. If you would invest  405,440  in Gujarat Fluorochemicals Limited on December 2, 2024 and sell it today you would lose (46,955) from holding Gujarat Fluorochemicals Limited or give up 11.58% of portfolio value over 90 days.

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

Fertilizers and Chemicals  vs.  Gujarat Fluorochemicals Limite

Fertilizers and Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fertilizers and Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gujarat Fluorochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fertilizers and Gujarat Fluorochemicals

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

The idea behind Fertilizers and Chemicals and Gujarat Fluorochemicals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.