Correlation Between First Credit and ITTEFAQ Iron

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

By analyzing existing cross correlation between First Credit And and ITTEFAQ Iron Industries, you can compare the effects of market volatilities on First Credit and ITTEFAQ Iron 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 First Credit with a short position of ITTEFAQ Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Credit and ITTEFAQ Iron.

Diversification Opportunities for First Credit and ITTEFAQ Iron

0.38

Correlation Coefficient

First Credit  ITTEFAQ Iron

Weak diversification

The 3 months correlation between First and ITTEFAQ is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Credit And and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries and First Credit 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 First Credit And are associated (or correlated) with ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of First Credit i.e., First Credit and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between First Credit and ITTEFAQ Iron

Assuming the 90 days trading horizon First Credit And is expected to generate 2.11 times more return on investment than ITTEFAQ Iron. However, First Credit is 2.11 times more volatile than ITTEFAQ Iron Industries. It trades about 0.05 of its potential returns per unit of risk. ITTEFAQ Iron Industries is currently generating about -0.01 per unit of risk. If you would invest  661.00  in First Credit And on September 27, 2024 and sell it today you would earn a total of  156.00  from holding First Credit And or generate 23.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	61.16%
Values	Daily Returns

First Credit And  vs.  ITTEFAQ Iron Industries

First Credit And

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Credit And are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, First Credit disclosed solid returns over the last few months and may actually be approaching a breakup point.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Credit and ITTEFAQ Iron

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

The idea behind First Credit And and ITTEFAQ Iron 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.