Correlation Between Gujarat Narmada and Kamdhenu

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

Diversification Opportunities for Gujarat Narmada and Kamdhenu

0.58

Correlation Coefficient

Gujarat Narmada  Kamdhenu

Very weak diversification

The 3 months correlation between Gujarat and Kamdhenu is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Kamdhenu Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamdhenu 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 Kamdhenu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamdhenu Limited has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Kamdhenu go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Kamdhenu

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the Kamdhenu. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Narmada Valley is 61.4 times less risky than Kamdhenu. The stock trades about -0.11 of its potential returns per unit of risk. The Kamdhenu Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,310  in Kamdhenu Limited on October 10, 2024 and sell it today you would lose (860.00) from holding Kamdhenu Limited or give up 16.2% of portfolio value over 90 days.

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

Gujarat Narmada Valley  vs.  Kamdhenu Limited

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Kamdhenu Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamdhenu Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Kamdhenu displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Narmada and Kamdhenu

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

The idea behind Gujarat Narmada Valley and Kamdhenu 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.