Correlation Between Garware Hi and ILFS Investment

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

Diversification Opportunities for Garware Hi and ILFS Investment

0.07

Correlation Coefficient

Garware Hi  ILFS Investment

Significant diversification

The 3 months correlation between Garware and ILFS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and ILFS Investment Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ILFS Investment Managers 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 ILFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ILFS Investment Managers has no effect on the direction of Garware Hi i.e., Garware Hi and ILFS Investment go up and down completely randomly.

Pair Corralation between Garware Hi and ILFS Investment

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to under-perform the ILFS Investment. In addition to that, Garware Hi is 1.67 times more volatile than ILFS Investment Managers. It trades about -0.34 of its total potential returns per unit of risk. ILFS Investment Managers is currently generating about -0.45 per unit of volatility. If you would invest  1,165  in ILFS Investment Managers on October 16, 2024 and sell it today you would lose (207.00) from holding ILFS Investment Managers or give up 17.77% of portfolio value over 90 days.

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

Garware Hi Tech Films  vs.  ILFS Investment Managers

Garware Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garware Hi Tech Films has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Garware Hi is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Garware Hi and ILFS Investment

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

The idea behind Garware Hi Tech Films and ILFS Investment Managers 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.