Correlation Between Gujarat Fluorochemicals and Sarthak Metals

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

Diversification Opportunities for Gujarat Fluorochemicals and Sarthak Metals

0.64

Correlation Coefficient

Gujarat Fluorochemicals  Sarthak Metals

Poor diversification

The 3 months correlation between Gujarat and Sarthak is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals 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 Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Sarthak Metals go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Sarthak Metals

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 0.65 times more return on investment than Sarthak Metals. However, Gujarat Fluorochemicals Limited is 1.53 times less risky than Sarthak Metals. It trades about 0.05 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about 0.02 per unit of risk. If you would invest  278,935  in Gujarat Fluorochemicals Limited on October 4, 2024 and sell it today you would earn a total of  137,625  from holding Gujarat Fluorochemicals Limited or generate 49.34% 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.  Sarthak Metals Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Gujarat Fluorochemicals and Sarthak Metals

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

The idea behind Gujarat Fluorochemicals Limited and Sarthak Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.