Correlation Between Gujarat Lease and Oriental Carbon

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

Diversification Opportunities for Gujarat Lease and Oriental Carbon

0.12

Correlation Coefficient

Gujarat Lease  Oriental Carbon

Average diversification

The 3 months correlation between Gujarat and Oriental is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon Chemicals 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 Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and Oriental Carbon go up and down completely randomly.

Pair Corralation between Gujarat Lease and Oriental Carbon

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to generate 0.93 times more return on investment than Oriental Carbon. However, Gujarat Lease Financing is 1.07 times less risky than Oriental Carbon. It trades about 0.04 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about -0.05 per unit of risk. If you would invest  717.00  in Gujarat Lease Financing on October 4, 2024 and sell it today you would earn a total of  28.00  from holding Gujarat Lease Financing or generate 3.91% return on investment over 90 days.

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

Gujarat Lease Financing  vs.  Oriental Carbon Chemicals

Gujarat Lease Financing

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gujarat Lease is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Gujarat Lease and Oriental Carbon

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

The idea behind Gujarat Lease Financing and Oriental Carbon 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.