Correlation Between India Glycols and Bodhi Tree

Can any of the company-specific risk be diversified away by investing in both India Glycols and Bodhi Tree 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 India Glycols and Bodhi Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between India Glycols Limited and Bodhi Tree Multimedia, you can compare the effects of market volatilities on India Glycols and Bodhi Tree 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 India Glycols with a short position of Bodhi Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of India Glycols and Bodhi Tree.

Diversification Opportunities for India Glycols and Bodhi Tree

0.21

Correlation Coefficient

India Glycols  Bodhi Tree

Modest diversification

The 3 months correlation between India and Bodhi is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and Bodhi Tree Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodhi Tree Multimedia and India Glycols 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 India Glycols Limited are associated (or correlated) with Bodhi Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodhi Tree Multimedia has no effect on the direction of India Glycols i.e., India Glycols and Bodhi Tree go up and down completely randomly.

Pair Corralation between India Glycols and Bodhi Tree

Assuming the 90 days trading horizon India Glycols is expected to generate 2.96 times less return on investment than Bodhi Tree. But when comparing it to its historical volatility, India Glycols Limited is 1.37 times less risky than Bodhi Tree. It trades about 0.09 of its potential returns per unit of risk. Bodhi Tree Multimedia is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,044  in Bodhi Tree Multimedia on October 22, 2024 and sell it today you would earn a total of  174.00  from holding Bodhi Tree Multimedia or generate 16.67% return on investment over 90 days.

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

India Glycols Limited  vs.  Bodhi Tree Multimedia

India Glycols Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, India Glycols may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with India Glycols and Bodhi Tree

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

The idea behind India Glycols Limited and Bodhi Tree Multimedia 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.