Correlation Between Gujarat Fluorochemicals and Fertilizers

Can any of the company-specific risk be diversified away by investing in both Gujarat Fluorochemicals and Fertilizers 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 Fertilizers 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 Fertilizers and Chemicals, you can compare the effects of market volatilities on Gujarat Fluorochemicals and Fertilizers 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 Fertilizers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Fluorochemicals and Fertilizers.

Diversification Opportunities for Gujarat Fluorochemicals and Fertilizers

0.65

Correlation Coefficient

Gujarat Fluorochemicals  Fertilizers

Poor diversification

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

Pair Corralation between Gujarat Fluorochemicals and Fertilizers

Assuming the 90 days trading horizon Gujarat Fluorochemicals is expected to generate 6.7 times less return on investment than Fertilizers. But when comparing it to its historical volatility, Gujarat Fluorochemicals Limited is 1.73 times less risky than Fertilizers. It trades about 0.02 of its potential returns per unit of risk. Fertilizers and Chemicals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21,901  in Fertilizers and Chemicals on December 2, 2024 and sell it today you would earn a total of  47,269  from holding Fertilizers and Chemicals or generate 215.83% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Fertilizers and Chemicals

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.

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.

Pair Trading with Gujarat Fluorochemicals and Fertilizers

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

The idea behind Gujarat Fluorochemicals Limited and Fertilizers and Chemicals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.