Correlation Between Sri Havisha and Southern Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Sri Havisha and Southern Petrochemicals 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 Sri Havisha and Southern Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sri Havisha Hospitality and Southern Petrochemicals Industries, you can compare the effects of market volatilities on Sri Havisha and Southern Petrochemicals 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 Sri Havisha with a short position of Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sri Havisha and Southern Petrochemicals.

Diversification Opportunities for Sri Havisha and Southern Petrochemicals

0.2

Correlation Coefficient

Sri Havisha  Southern Petrochemicals

Modest diversification

The 3 months correlation between Sri and Southern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sri Havisha Hospitality and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals and Sri Havisha 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 Sri Havisha Hospitality are associated (or correlated) with Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Sri Havisha i.e., Sri Havisha and Southern Petrochemicals go up and down completely randomly.

Pair Corralation between Sri Havisha and Southern Petrochemicals

Assuming the 90 days trading horizon Sri Havisha Hospitality is expected to generate 2.05 times more return on investment than Southern Petrochemicals. However, Sri Havisha is 2.05 times more volatile than Southern Petrochemicals Industries. It trades about -0.01 of its potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about -0.09 per unit of risk. If you would invest  271.00  in Sri Havisha Hospitality on October 10, 2024 and sell it today you would lose (23.00) from holding Sri Havisha Hospitality or give up 8.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sri Havisha Hospitality  vs.  Southern Petrochemicals Indust

Sri Havisha Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

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

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries 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 Sri Havisha and Southern Petrochemicals

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

The idea behind Sri Havisha Hospitality and Southern Petrochemicals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.