Correlation Between Indian Metals and Surya Roshni

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

Diversification Opportunities for Indian Metals and Surya Roshni

-0.54

Correlation Coefficient

Indian Metals  Surya Roshni

Excellent diversification

The 3 months correlation between Indian and Surya is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Surya Roshni Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surya Roshni Limited 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 Surya Roshni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surya Roshni Limited has no effect on the direction of Indian Metals i.e., Indian Metals and Surya Roshni go up and down completely randomly.

Pair Corralation between Indian Metals and Surya Roshni

Assuming the 90 days trading horizon Indian Metals is expected to generate 17.86 times less return on investment than Surya Roshni. But when comparing it to its historical volatility, Indian Metals Ferro is 32.9 times less risky than Surya Roshni. It trades about 0.2 of its potential returns per unit of risk. Surya Roshni Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  34,019  in Surya Roshni Limited on October 5, 2024 and sell it today you would lose (5,854) from holding Surya Roshni Limited or give up 17.21% of portfolio value over 90 days.

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

Indian Metals Ferro  vs.  Surya Roshni 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 uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Surya Roshni Limited

Risk-Adjusted Performance

8 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Roshni Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Surya Roshni displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Metals and Surya Roshni

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

The idea behind Indian Metals Ferro and Surya Roshni 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 Anywhere module to track or share privately all of your investments from the convenience of any device.