Correlation Between Gujarat Narmada and Meghmani Organics

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

Diversification Opportunities for Gujarat Narmada and Meghmani Organics

0.94

Correlation Coefficient

Gujarat Narmada  Meghmani Organics

Almost no diversification

The 3 months correlation between Gujarat and Meghmani is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Meghmani Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meghmani Organics 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 Meghmani Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meghmani Organics has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Meghmani Organics go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Meghmani Organics

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to generate 0.87 times more return on investment than Meghmani Organics. However, Gujarat Narmada Valley is 1.15 times less risky than Meghmani Organics. It trades about -0.19 of its potential returns per unit of risk. Meghmani Organics Limited is currently generating about -0.24 per unit of risk. If you would invest  63,525  in Gujarat Narmada Valley on December 4, 2024 and sell it today you would lose (16,470) from holding Gujarat Narmada Valley or give up 25.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Gujarat Narmada Valley  vs.  Meghmani Organics 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.

Meghmani Organics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meghmani Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Gujarat Narmada and Meghmani Organics

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

The idea behind Gujarat Narmada Valley and Meghmani Organics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.