Correlation Between Gujarat Fluorochemicals and Dhunseri Investments

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Dhunseri Investments

0.06

Correlation Coefficient

Gujarat Fluorochemicals  Dhunseri Investments

Significant diversification

The 3 months correlation between Gujarat and Dhunseri is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Dhunseri Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhunseri Investments and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited are associated (or correlated) with Dhunseri Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhunseri Investments has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Dhunseri Investments go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Dhunseri Investments

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 1.18 times more return on investment than Dhunseri Investments. However, Gujarat Fluorochemicals is 1.18 times more volatile than Dhunseri Investments Limited. It trades about 0.25 of its potential returns per unit of risk. Dhunseri Investments Limited is currently generating about -0.22 per unit of risk. If you would invest  399,755  in Gujarat Fluorochemicals Limited on September 19, 2024 and sell it today you would earn a total of  37,860  from holding Gujarat Fluorochemicals Limited or generate 9.47% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Dhunseri Investments Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Gujarat Fluorochemicals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dhunseri Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhunseri Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Dhunseri Investments is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gujarat Fluorochemicals and Dhunseri Investments

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

The idea behind Gujarat Fluorochemicals Limited and Dhunseri Investments 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.