Correlation Between Grays Leasing and ITTEFAQ Iron

Can any of the company-specific risk be diversified away by investing in both Grays Leasing and ITTEFAQ Iron 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 Grays Leasing and ITTEFAQ Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grays Leasing and ITTEFAQ Iron Industries, you can compare the effects of market volatilities on Grays Leasing and ITTEFAQ Iron 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 Grays Leasing with a short position of ITTEFAQ Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grays Leasing and ITTEFAQ Iron.

Diversification Opportunities for Grays Leasing and ITTEFAQ Iron

0.59

Correlation Coefficient

Grays Leasing  ITTEFAQ Iron

Very weak diversification

The 3 months correlation between Grays and ITTEFAQ is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Grays Leasing and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries and Grays Leasing 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 Grays Leasing are associated (or correlated) with ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of Grays Leasing i.e., Grays Leasing and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between Grays Leasing and ITTEFAQ Iron

Assuming the 90 days trading horizon Grays Leasing is expected to generate 1.94 times more return on investment than ITTEFAQ Iron. However, Grays Leasing is 1.94 times more volatile than ITTEFAQ Iron Industries. It trades about 0.06 of its potential returns per unit of risk. ITTEFAQ Iron Industries is currently generating about 0.04 per unit of risk. If you would invest  350.00  in Grays Leasing on October 15, 2024 and sell it today you would earn a total of  216.00  from holding Grays Leasing or generate 61.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Grays Leasing  vs.  ITTEFAQ Iron Industries

Grays Leasing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grays Leasing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grays Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grays Leasing and ITTEFAQ Iron

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

The idea behind Grays Leasing and ITTEFAQ Iron Industries 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.