Correlation Between Garware Hi and Rail Vikas

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

Diversification Opportunities for Garware Hi and Rail Vikas

-0.33

Correlation Coefficient

Garware Hi  Rail Vikas

Very good diversification

The 3 months correlation between Garware and Rail is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Rail Vikas Nigam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rail Vikas Nigam 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 Rail Vikas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rail Vikas Nigam has no effect on the direction of Garware Hi i.e., Garware Hi and Rail Vikas go up and down completely randomly.

Pair Corralation between Garware Hi and Rail Vikas

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.19 times more return on investment than Rail Vikas. However, Garware Hi is 1.19 times more volatile than Rail Vikas Nigam. It trades about -0.1 of its potential returns per unit of risk. Rail Vikas Nigam is currently generating about -0.2 per unit of risk. If you would invest  522,665  in Garware Hi Tech Films on October 11, 2024 and sell it today you would lose (29,420) from holding Garware Hi Tech Films or give up 5.63% of portfolio value over 90 days.

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

Garware Hi Tech Films  vs.  Rail Vikas Nigam

Garware Hi Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rail Vikas Nigam

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rail Vikas Nigam has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Garware Hi and Rail Vikas

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

The idea behind Garware Hi Tech Films and Rail Vikas Nigam 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.