Correlation Between India Glycols and Genus Paper

Can any of the company-specific risk be diversified away by investing in both India Glycols and Genus Paper 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 Genus Paper 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 Genus Paper Boards, you can compare the effects of market volatilities on India Glycols and Genus Paper 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 Genus Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of India Glycols and Genus Paper.

Diversification Opportunities for India Glycols and Genus Paper

0.64

Correlation Coefficient

India Glycols  Genus Paper

Poor diversification

The 3 months correlation between India and Genus is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and Genus Paper Boards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genus Paper Boards 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 Genus Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genus Paper Boards has no effect on the direction of India Glycols i.e., India Glycols and Genus Paper go up and down completely randomly.

Pair Corralation between India Glycols and Genus Paper

Assuming the 90 days trading horizon India Glycols Limited is expected to generate 1.04 times more return on investment than Genus Paper. However, India Glycols is 1.04 times more volatile than Genus Paper Boards. It trades about -0.06 of its potential returns per unit of risk. Genus Paper Boards is currently generating about -0.06 per unit of risk. If you would invest  147,745  in India Glycols Limited on October 8, 2024 and sell it today you would lose (16,145) from holding India Glycols Limited or give up 10.93% of portfolio value over 90 days.

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

India Glycols Limited  vs.  Genus Paper Boards

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Genus Paper Boards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genus Paper Boards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with India Glycols and Genus Paper

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

The idea behind India Glycols Limited and Genus Paper Boards 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.