Correlation Between Golden Tobacco and India Glycols

Can any of the company-specific risk be diversified away by investing in both Golden Tobacco and India Glycols 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 Golden Tobacco and India Glycols into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Golden Tobacco Limited and India Glycols Limited, you can compare the effects of market volatilities on Golden Tobacco and India Glycols 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 Golden Tobacco with a short position of India Glycols. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Tobacco and India Glycols.

Diversification Opportunities for Golden Tobacco and India Glycols

0.51

Correlation Coefficient

Golden Tobacco  India Glycols

Very weak diversification

The 3 months correlation between Golden and India is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Golden Tobacco Limited and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols Limited and Golden Tobacco 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 Golden Tobacco Limited are associated (or correlated) with India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of Golden Tobacco i.e., Golden Tobacco and India Glycols go up and down completely randomly.

Pair Corralation between Golden Tobacco and India Glycols

Assuming the 90 days trading horizon Golden Tobacco Limited is expected to generate 1.03 times more return on investment than India Glycols. However, Golden Tobacco is 1.03 times more volatile than India Glycols Limited. It trades about 0.1 of its potential returns per unit of risk. India Glycols Limited is currently generating about 0.09 per unit of risk. If you would invest  3,880  in Golden Tobacco Limited on September 28, 2024 and sell it today you would earn a total of  211.00  from holding Golden Tobacco Limited or generate 5.44% return on investment over 90 days.

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

Golden Tobacco Limited  vs.  India Glycols Limited

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

India Glycols Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, India Glycols may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Golden Tobacco and India Glycols

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

The idea behind Golden Tobacco Limited and India Glycols 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.