Correlation Between IG Petrochemicals and Vesuvius India

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

By analyzing existing cross correlation between IG Petrochemicals Limited and Vesuvius India Limited, you can compare the effects of market volatilities on IG Petrochemicals and Vesuvius India 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 IG Petrochemicals with a short position of Vesuvius India. Check out your portfolio center. Please also check ongoing floating volatility patterns of IG Petrochemicals and Vesuvius India.

Diversification Opportunities for IG Petrochemicals and Vesuvius India

0.57

Correlation Coefficient

IG Petrochemicals  Vesuvius India

Very weak diversification

The 3 months correlation between IGPL and Vesuvius is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IG Petrochemicals Limited and Vesuvius India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vesuvius India and IG Petrochemicals 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 IG Petrochemicals Limited are associated (or correlated) with Vesuvius India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vesuvius India has no effect on the direction of IG Petrochemicals i.e., IG Petrochemicals and Vesuvius India go up and down completely randomly.

Pair Corralation between IG Petrochemicals and Vesuvius India

Assuming the 90 days trading horizon IG Petrochemicals is expected to generate 5.72 times less return on investment than Vesuvius India. But when comparing it to its historical volatility, IG Petrochemicals Limited is 1.13 times less risky than Vesuvius India. It trades about 0.02 of its potential returns per unit of risk. Vesuvius India Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  160,105  in Vesuvius India Limited on October 23, 2024 and sell it today you would earn a total of  246,250  from holding Vesuvius India Limited or generate 153.81% return on investment over 90 days.

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

IG Petrochemicals Limited  vs.  Vesuvius India Limited

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited 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.

Vesuvius India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vesuvius India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with IG Petrochemicals and Vesuvius India

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

The idea behind IG Petrochemicals Limited and Vesuvius India 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.