Correlation Between Genus Power and Zuari Agro

Can any of the company-specific risk be diversified away by investing in both Genus Power and Zuari Agro 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 Genus Power and Zuari Agro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genus Power Infrastructures and Zuari Agro Chemicals, you can compare the effects of market volatilities on Genus Power and Zuari Agro 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 Genus Power with a short position of Zuari Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genus Power and Zuari Agro.

Diversification Opportunities for Genus Power and Zuari Agro

0.34

Correlation Coefficient

Genus Power  Zuari Agro

Weak diversification

The 3 months correlation between Genus and Zuari is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Genus Power Infrastructures and Zuari Agro Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zuari Agro Chemicals and Genus Power 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 Genus Power Infrastructures are associated (or correlated) with Zuari Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zuari Agro Chemicals has no effect on the direction of Genus Power i.e., Genus Power and Zuari Agro go up and down completely randomly.

Pair Corralation between Genus Power and Zuari Agro

Assuming the 90 days trading horizon Genus Power is expected to generate 4.63 times less return on investment than Zuari Agro. But when comparing it to its historical volatility, Genus Power Infrastructures is 1.03 times less risky than Zuari Agro. It trades about 0.02 of its potential returns per unit of risk. Zuari Agro Chemicals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20,578  in Zuari Agro Chemicals on September 2, 2024 and sell it today you would earn a total of  3,211  from holding Zuari Agro Chemicals or generate 15.6% return on investment over 90 days.

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

Genus Power Infrastructures  vs.  Zuari Agro Chemicals

Genus Power Infrastr

Risk-Adjusted Performance

1 of 100

Weak

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

Zuari Agro Chemicals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Zuari Agro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Genus Power and Zuari Agro

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

The idea behind Genus Power Infrastructures and Zuari Agro 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.