Correlation Between Indian Metals and Dhunseri Investments

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Dhunseri Investments 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 Dhunseri Investments 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 Dhunseri Investments Limited, you can compare the effects of market volatilities on Indian Metals and Dhunseri Investments 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 Dhunseri Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Dhunseri Investments.

Diversification Opportunities for Indian Metals and Dhunseri Investments

0.07

Correlation Coefficient

Indian Metals  Dhunseri Investments

Significant diversification

The 3 months correlation between Indian and Dhunseri is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Dhunseri Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhunseri Investments 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 Dhunseri Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhunseri Investments has no effect on the direction of Indian Metals i.e., Indian Metals and Dhunseri Investments go up and down completely randomly.

Pair Corralation between Indian Metals and Dhunseri Investments

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.71 times more return on investment than Dhunseri Investments. However, Indian Metals is 1.71 times more volatile than Dhunseri Investments Limited. It trades about 0.2 of its potential returns per unit of risk. Dhunseri Investments Limited is currently generating about -0.32 per unit of risk. If you would invest  79,970  in Indian Metals Ferro on September 21, 2024 and sell it today you would earn a total of  9,160  from holding Indian Metals Ferro or generate 11.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Indian Metals Ferro  vs.  Dhunseri Investments Limited

Indian Metals Ferro

Risk-Adjusted Performance

15 of 100

Solid

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 weak basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dhunseri Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhunseri Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Indian Metals and Dhunseri Investments

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

The idea behind Indian Metals Ferro and Dhunseri Investments 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.