Correlation Between Foods Inns and Gujarat Fluorochemicals

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

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

Diversification Opportunities for Foods Inns and Gujarat Fluorochemicals

0.63

Correlation Coefficient

Foods Inns  Gujarat Fluorochemicals

Poor diversification

The 3 months correlation between Foods and Gujarat is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Foods Inns Limited and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals and Foods Inns 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 Foods Inns Limited are associated (or correlated) with Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of Foods Inns i.e., Foods Inns and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between Foods Inns and Gujarat Fluorochemicals

Assuming the 90 days trading horizon Foods Inns is expected to generate 7.2 times less return on investment than Gujarat Fluorochemicals. In addition to that, Foods Inns is 1.38 times more volatile than Gujarat Fluorochemicals Limited. It trades about 0.0 of its total potential returns per unit of risk. Gujarat Fluorochemicals Limited is currently generating about 0.04 per unit of volatility. If you would invest  277,357  in Gujarat Fluorochemicals Limited on October 22, 2024 and sell it today you would earn a total of  99,853  from holding Gujarat Fluorochemicals Limited or generate 36.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Foods Inns Limited  vs.  Gujarat Fluorochemicals Limite

Foods Inns Limited

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Foods Inns Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Foods Inns is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Gujarat Fluorochemicals

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Foods Inns and Gujarat Fluorochemicals

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

The idea behind Foods Inns Limited and Gujarat Fluorochemicals 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.