Correlation Between Garware Hi and Dynamic Cables

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

Diversification Opportunities for Garware Hi and Dynamic Cables

0.84

Correlation Coefficient

Garware Hi  Dynamic Cables

Very poor diversification

The 3 months correlation between Garware and Dynamic is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Dynamic Cables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Cables 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 Dynamic Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Cables has no effect on the direction of Garware Hi i.e., Garware Hi and Dynamic Cables go up and down completely randomly.

Pair Corralation between Garware Hi and Dynamic Cables

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to under-perform the Dynamic Cables. But the stock apears to be less risky and, when comparing its historical volatility, Garware Hi Tech Films is 1.01 times less risky than Dynamic Cables. The stock trades about -0.35 of its potential returns per unit of risk. The Dynamic Cables Limited is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  105,265  in Dynamic Cables Limited on October 15, 2024 and sell it today you would lose (16,120) from holding Dynamic Cables Limited or give up 15.31% of portfolio value over 90 days.

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

Garware Hi Tech Films  vs.  Dynamic Cables Limited

Garware Hi Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Garware Hi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dynamic Cables

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Cables Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Dynamic Cables unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garware Hi and Dynamic Cables

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

The idea behind Garware Hi Tech Films and Dynamic Cables 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.