Correlation Between Gujarat Fluorochemicals and Sudarshan Chemical

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

Diversification Opportunities for Gujarat Fluorochemicals and Sudarshan Chemical

0.46

Correlation Coefficient

Gujarat Fluorochemicals  Sudarshan Chemical

Very weak diversification

The 3 months correlation between Gujarat and Sudarshan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Sudarshan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sudarshan Chemical 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 Sudarshan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sudarshan Chemical has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Sudarshan Chemical go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Sudarshan Chemical

Assuming the 90 days trading horizon Gujarat Fluorochemicals is expected to generate 2.38 times less return on investment than Sudarshan Chemical. But when comparing it to its historical volatility, Gujarat Fluorochemicals Limited is 1.54 times less risky than Sudarshan Chemical. It trades about 0.05 of its potential returns per unit of risk. Sudarshan Chemical Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  99,095  in Sudarshan Chemical Industries on October 5, 2024 and sell it today you would earn a total of  14,725  from holding Sudarshan Chemical Industries or generate 14.86% return on investment over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  Sudarshan Chemical Industries

Gujarat Fluorochemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Gujarat Fluorochemicals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sudarshan Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Sudarshan Chemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Fluorochemicals and Sudarshan Chemical

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

The idea behind Gujarat Fluorochemicals Limited and Sudarshan Chemical 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.