Correlation Between Gujarat Narmada and PI Industries

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

Diversification Opportunities for Gujarat Narmada and PI Industries

0.66

Correlation Coefficient

Gujarat Narmada  PI Industries

Poor diversification

The 3 months correlation between Gujarat and PIIND is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and PI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Industries 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 PI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Industries Limited has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and PI Industries go up and down completely randomly.

Pair Corralation between Gujarat Narmada and PI Industries

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the PI Industries. In addition to that, Gujarat Narmada is 1.34 times more volatile than PI Industries Limited. It trades about -0.09 of its total potential returns per unit of risk. PI Industries Limited is currently generating about -0.06 per unit of volatility. If you would invest  378,210  in PI Industries Limited on December 25, 2024 and sell it today you would lose (28,960) from holding PI Industries Limited or give up 7.66% of portfolio value over 90 days.

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

Gujarat Narmada Valley  vs.  PI Industries 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.

PI Industries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days PI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Gujarat Narmada and PI Industries

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

The idea behind Gujarat Narmada Valley and PI Industries 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.