Correlation Between Gujarat Lease and Dodla Dairy

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

Diversification Opportunities for Gujarat Lease and Dodla Dairy

0.72

Correlation Coefficient

Gujarat Lease  Dodla Dairy

Poor diversification

The 3 months correlation between Gujarat and Dodla is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and Dodla Dairy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodla Dairy Limited 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 Dodla Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodla Dairy Limited has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and Dodla Dairy go up and down completely randomly.

Pair Corralation between Gujarat Lease and Dodla Dairy

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to under-perform the Dodla Dairy. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Lease Financing is 1.62 times less risky than Dodla Dairy. The stock trades about -0.51 of its potential returns per unit of risk. The Dodla Dairy Limited is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  128,720  in Dodla Dairy Limited on October 8, 2024 and sell it today you would lose (5,030) from holding Dodla Dairy Limited or give up 3.91% 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.  Dodla Dairy Limited

Gujarat Lease Financing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dodla Dairy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Gujarat Lease and Dodla Dairy

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

The idea behind Gujarat Lease Financing and Dodla Dairy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.