Correlation Between GM Breweries and NIFTY SUMER

Can any of the company-specific risk be diversified away by investing in both GM Breweries and NIFTY SUMER 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 GM Breweries and NIFTY SUMER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GM Breweries Limited and NIFTY SUMER DURABLES, you can compare the effects of market volatilities on GM Breweries and NIFTY SUMER 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 GM Breweries with a short position of NIFTY SUMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and NIFTY SUMER.

Diversification Opportunities for GM Breweries and NIFTY SUMER

0.73

Correlation Coefficient

GM Breweries  NIFTY SUMER

Poor diversification

The 3 months correlation between GMBREW and NIFTY is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and NIFTY SUMER DURABLES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIFTY SUMER DURABLES and GM Breweries 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 GM Breweries Limited are associated (or correlated) with NIFTY SUMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIFTY SUMER DURABLES has no effect on the direction of GM Breweries i.e., GM Breweries and NIFTY SUMER go up and down completely randomly.

Pair Corralation between GM Breweries and NIFTY SUMER

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the NIFTY SUMER. In addition to that, GM Breweries is 2.41 times more volatile than NIFTY SUMER DURABLES. It trades about -0.05 of its total potential returns per unit of risk. NIFTY SUMER DURABLES is currently generating about 0.02 per unit of volatility. If you would invest  4,238,660  in NIFTY SUMER DURABLES on October 9, 2024 and sell it today you would earn a total of  12,380  from holding NIFTY SUMER DURABLES or generate 0.29% return on investment over 90 days.

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

GM Breweries Limited  vs.  NIFTY SUMER DURABLES

Pair Trading with GM Breweries and NIFTY SUMER

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

The idea behind GM Breweries Limited and NIFTY SUMER DURABLES 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.