Correlation Between Gujarat Narmada and Dalmia Bharat

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

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

Diversification Opportunities for Gujarat Narmada and Dalmia Bharat

0.7

Correlation Coefficient

Gujarat Narmada  Dalmia Bharat

Poor diversification

The 3 months correlation between Gujarat and Dalmia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Dalmia Bharat Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalmia Bharat Limited and Gujarat Narmada 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 Narmada Valley are associated (or correlated) with Dalmia Bharat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalmia Bharat Limited has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Dalmia Bharat go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Dalmia Bharat

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the Dalmia Bharat. In addition to that, Gujarat Narmada is 1.51 times more volatile than Dalmia Bharat Limited. It trades about -0.09 of its total potential returns per unit of risk. Dalmia Bharat Limited is currently generating about 0.01 per unit of volatility. If you would invest  173,855  in Dalmia Bharat Limited on December 26, 2024 and sell it today you would earn a total of  715.00  from holding Dalmia Bharat Limited or generate 0.41% return on investment over 90 days.

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

Gujarat Narmada Valley  vs.  Dalmia Bharat Limited

Gujarat Narmada Valley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Narmada Valley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Dalmia Bharat Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dalmia Bharat Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dalmia Bharat is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Gujarat Narmada and Dalmia Bharat

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

The idea behind Gujarat Narmada Valley and Dalmia Bharat 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.