Correlation Between Garware Hi and Alkali Metals

Can any of the company-specific risk be diversified away by investing in both Garware Hi and Alkali Metals 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 Garware Hi and Alkali Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garware Hi Tech Films and Alkali Metals Limited, you can compare the effects of market volatilities on Garware Hi and Alkali Metals 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 Garware Hi with a short position of Alkali Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garware Hi and Alkali Metals.

Diversification Opportunities for Garware Hi and Alkali Metals

-0.11

Correlation Coefficient

Garware Hi  Alkali Metals

Good diversification

The 3 months correlation between Garware and Alkali is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Alkali Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkali Metals Limited and Garware Hi 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 Garware Hi Tech Films are associated (or correlated) with Alkali Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkali Metals Limited has no effect on the direction of Garware Hi i.e., Garware Hi and Alkali Metals go up and down completely randomly.

Pair Corralation between Garware Hi and Alkali Metals

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.64 times more return on investment than Alkali Metals. However, Garware Hi is 1.64 times more volatile than Alkali Metals Limited. It trades about 0.17 of its potential returns per unit of risk. Alkali Metals Limited is currently generating about 0.01 per unit of risk. If you would invest  369,785  in Garware Hi Tech Films on October 8, 2024 and sell it today you would earn a total of  140,450  from holding Garware Hi Tech Films or generate 37.98% return on investment over 90 days.

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

Garware Hi Tech Films  vs.  Alkali Metals Limited

Garware Hi Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Garware Hi and Alkali Metals

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

The idea behind Garware Hi Tech Films and Alkali Metals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.