Correlation Between Indian Metals and State Trading

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

Diversification Opportunities for Indian Metals and State Trading

0.25

Correlation Coefficient

Indian Metals  State Trading

Modest diversification

The 3 months correlation between Indian and State is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Indian Metals i.e., Indian Metals and State Trading go up and down completely randomly.

Pair Corralation between Indian Metals and State Trading

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 0.8 times more return on investment than State Trading. However, Indian Metals Ferro is 1.26 times less risky than State Trading. It trades about 0.1 of its potential returns per unit of risk. The State Trading is currently generating about 0.05 per unit of risk. If you would invest  25,798  in Indian Metals Ferro on October 4, 2024 and sell it today you would earn a total of  59,752  from holding Indian Metals Ferro or generate 231.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Indian Metals Ferro  vs.  The State Trading

Indian Metals Ferro

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Indian Metals and State Trading

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

The idea behind Indian Metals Ferro and The State Trading 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.