Correlation Between Industrial Investment and Gujarat Alkalies

Can any of the company-specific risk be diversified away by investing in both Industrial Investment and Gujarat Alkalies 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 Industrial Investment and Gujarat Alkalies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial Investment Trust and Gujarat Alkalies and, you can compare the effects of market volatilities on Industrial Investment and Gujarat Alkalies 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 Industrial Investment with a short position of Gujarat Alkalies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Investment and Gujarat Alkalies.

Diversification Opportunities for Industrial Investment and Gujarat Alkalies

-0.5

Correlation Coefficient

Industrial Investment  Gujarat Alkalies

Very good diversification

The 3 months correlation between Industrial and Gujarat is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and Gujarat Alkalies and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Alkalies and Industrial Investment 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 Industrial Investment Trust are associated (or correlated) with Gujarat Alkalies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Alkalies has no effect on the direction of Industrial Investment i.e., Industrial Investment and Gujarat Alkalies go up and down completely randomly.

Pair Corralation between Industrial Investment and Gujarat Alkalies

Assuming the 90 days trading horizon Industrial Investment Trust is expected to under-perform the Gujarat Alkalies. In addition to that, Industrial Investment is 1.76 times more volatile than Gujarat Alkalies and. It trades about -0.57 of its total potential returns per unit of risk. Gujarat Alkalies and is currently generating about -0.19 per unit of volatility. If you would invest  79,015  in Gujarat Alkalies and on October 11, 2024 and sell it today you would lose (4,715) from holding Gujarat Alkalies and or give up 5.97% of portfolio value over 90 days.

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

Industrial Investment Trust  vs.  Gujarat Alkalies and

Industrial Investment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Industrial Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Industrial Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gujarat Alkalies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial Investment and Gujarat Alkalies

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

The idea behind Industrial Investment Trust and Gujarat Alkalies and 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 Global Correlations module to find global opportunities by holding instruments from different markets.