Correlation Between Gujarat Lease and Arvind Fashions

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

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

Diversification Opportunities for Gujarat Lease and Arvind Fashions

0.78

Correlation Coefficient

Gujarat Lease  Arvind Fashions

Poor diversification

The 3 months correlation between Gujarat and Arvind is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and Arvind Fashions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arvind Fashions and Gujarat Lease 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 Lease Financing are associated (or correlated) with Arvind Fashions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arvind Fashions has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and Arvind Fashions go up and down completely randomly.

Pair Corralation between Gujarat Lease and Arvind Fashions

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to under-perform the Arvind Fashions. In addition to that, Gujarat Lease is 1.13 times more volatile than Arvind Fashions Limited. It trades about -0.23 of its total potential returns per unit of risk. Arvind Fashions Limited is currently generating about -0.12 per unit of volatility. If you would invest  51,410  in Arvind Fashions Limited on December 26, 2024 and sell it today you would lose (11,180) from holding Arvind Fashions Limited or give up 21.75% of portfolio value over 90 days.

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

Gujarat Lease Financing  vs.  Arvind Fashions Limited

Gujarat Lease Financing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Lease Financing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Arvind Fashions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arvind Fashions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gujarat Lease and Arvind Fashions

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

The idea behind Gujarat Lease Financing and Arvind Fashions 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.