Correlation Between Indian Metals and Coromandel International

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Coromandel International 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 Indian Metals and Coromandel International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and Coromandel International Limited, you can compare the effects of market volatilities on Indian Metals and Coromandel International 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 Indian Metals with a short position of Coromandel International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Coromandel International.

Diversification Opportunities for Indian Metals and Coromandel International

0.63

Correlation Coefficient

Indian Metals  Coromandel International

Poor diversification

The 3 months correlation between Indian and Coromandel is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Coromandel International Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coromandel International and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with Coromandel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coromandel International has no effect on the direction of Indian Metals i.e., Indian Metals and Coromandel International go up and down completely randomly.

Pair Corralation between Indian Metals and Coromandel International

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.8 times more return on investment than Coromandel International. However, Indian Metals is 1.8 times more volatile than Coromandel International Limited. It trades about 0.2 of its potential returns per unit of risk. Coromandel International Limited is currently generating about 0.24 per unit of risk. If you would invest  66,059  in Indian Metals Ferro on October 7, 2024 and sell it today you would earn a total of  24,031  from holding Indian Metals Ferro or generate 36.38% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Coromandel International Limit

Indian Metals Ferro

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coromandel International

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coromandel International Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Coromandel International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Metals and Coromandel International

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

The idea behind Indian Metals Ferro and Coromandel International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.