Correlation Between Gujarat Lease and Southern Petrochemicals

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

Diversification Opportunities for Gujarat Lease and Southern Petrochemicals

0.06

Correlation Coefficient

Gujarat Lease  Southern Petrochemicals

Significant diversification

The 3 months correlation between Gujarat and Southern is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals 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 Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and Southern Petrochemicals go up and down completely randomly.

Pair Corralation between Gujarat Lease and Southern Petrochemicals

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to under-perform the Southern Petrochemicals. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Lease Financing is 1.05 times less risky than Southern Petrochemicals. The stock trades about -0.05 of its potential returns per unit of risk. The Southern Petrochemicals Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,774  in Southern Petrochemicals Industries on October 9, 2024 and sell it today you would lose (328.00) from holding Southern Petrochemicals Industries or give up 4.22% of portfolio value over 90 days.

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

Gujarat Lease Financing  vs.  Southern Petrochemicals Indust

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.

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries 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 Southern Petrochemicals

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

The idea behind Gujarat Lease Financing and Southern Petrochemicals Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.