Correlation Between Golden Tobacco and Indo Borax

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

Diversification Opportunities for Golden Tobacco and Indo Borax

0.23

Correlation Coefficient

Golden Tobacco  Indo Borax

Modest diversification

The 3 months correlation between Golden and Indo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Golden Tobacco Limited and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals 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 Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of Golden Tobacco i.e., Golden Tobacco and Indo Borax go up and down completely randomly.

Pair Corralation between Golden Tobacco and Indo Borax

Assuming the 90 days trading horizon Golden Tobacco Limited is expected to generate 1.15 times more return on investment than Indo Borax. However, Golden Tobacco is 1.15 times more volatile than Indo Borax Chemicals. It trades about -0.03 of its potential returns per unit of risk. Indo Borax Chemicals is currently generating about -0.14 per unit of risk. If you would invest  4,076  in Golden Tobacco Limited on December 2, 2024 and sell it today you would lose (315.00) from holding Golden Tobacco Limited or give up 7.73% of portfolio value over 90 days.

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

Golden Tobacco Limited  vs.  Indo Borax Chemicals

Golden Tobacco

Risk-Adjusted Performance

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.

Indo Borax Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Golden Tobacco and Indo Borax

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

The idea behind Golden Tobacco Limited and Indo Borax Chemicals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.