Correlation Between Garuda Construction and Dhampur Bio

Can any of the company-specific risk be diversified away by investing in both Garuda Construction and Dhampur Bio 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 Garuda Construction and Dhampur Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garuda Construction Engineering and Dhampur Bio Organics, you can compare the effects of market volatilities on Garuda Construction and Dhampur Bio 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 Garuda Construction with a short position of Dhampur Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and Dhampur Bio.

Diversification Opportunities for Garuda Construction and Dhampur Bio

0.4

Correlation Coefficient

Garuda Construction  Dhampur Bio

Very weak diversification

The 3 months correlation between Garuda and Dhampur is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Dhampur Bio Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhampur Bio Organics and Garuda Construction 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 Garuda Construction Engineering are associated (or correlated) with Dhampur Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhampur Bio Organics has no effect on the direction of Garuda Construction i.e., Garuda Construction and Dhampur Bio go up and down completely randomly.

Pair Corralation between Garuda Construction and Dhampur Bio

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to under-perform the Dhampur Bio. In addition to that, Garuda Construction is 1.53 times more volatile than Dhampur Bio Organics. It trades about -0.03 of its total potential returns per unit of risk. Dhampur Bio Organics is currently generating about -0.02 per unit of volatility. If you would invest  13,303  in Dhampur Bio Organics on September 14, 2024 and sell it today you would lose (796.00) from holding Dhampur Bio Organics or give up 5.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.74%
Values	Daily Returns

Garuda Construction Engineerin  vs.  Dhampur Bio Organics

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dhampur Bio Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhampur Bio Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dhampur Bio is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Garuda Construction and Dhampur Bio

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

The idea behind Garuda Construction Engineering and Dhampur Bio Organics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.