Correlation Between Fine Organic and Bodal Chemicals

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

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

Diversification Opportunities for Fine Organic and Bodal Chemicals

0.59

Correlation Coefficient

Fine Organic  Bodal Chemicals

Very weak diversification

The 3 months correlation between Fine and Bodal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and Bodal Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodal Chemicals and Fine Organic 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 Fine Organic Industries are associated (or correlated) with Bodal Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodal Chemicals has no effect on the direction of Fine Organic i.e., Fine Organic and Bodal Chemicals go up and down completely randomly.

Pair Corralation between Fine Organic and Bodal Chemicals

Assuming the 90 days trading horizon Fine Organic Industries is expected to under-perform the Bodal Chemicals. In addition to that, Fine Organic is 1.0 times more volatile than Bodal Chemicals Limited. It trades about -0.41 of its total potential returns per unit of risk. Bodal Chemicals Limited is currently generating about -0.15 per unit of volatility. If you would invest  7,208  in Bodal Chemicals Limited on September 26, 2024 and sell it today you would lose (277.00) from holding Bodal Chemicals Limited or give up 3.84% of portfolio value over 90 days.

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

Fine Organic Industries  vs.  Bodal Chemicals Limited

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bodal Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodal Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fine Organic and Bodal Chemicals

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

The idea behind Fine Organic Industries and Bodal Chemicals 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.