Correlation Between Indian Card and S P

Can any of the company-specific risk be diversified away by investing in both Indian Card and S P 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 Card and S P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Card Clothing and S P Apparels, you can compare the effects of market volatilities on Indian Card and S P 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 Card with a short position of S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Card and S P.

Diversification Opportunities for Indian Card and S P

0.48

Correlation Coefficient

Indian Card  S P

Very weak diversification

The 3 months correlation between Indian and SPAL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Indian Card Clothing and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels and Indian Card 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 Card Clothing are associated (or correlated) with S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Indian Card i.e., Indian Card and S P go up and down completely randomly.

Pair Corralation between Indian Card and S P

Assuming the 90 days trading horizon Indian Card is expected to generate 2.61 times less return on investment than S P. But when comparing it to its historical volatility, Indian Card Clothing is 1.08 times less risky than S P. It trades about 0.04 of its potential returns per unit of risk. S P Apparels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  31,735  in S P Apparels on October 7, 2024 and sell it today you would earn a total of  59,085  from holding S P Apparels or generate 186.18% return on investment over 90 days.

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

Indian Card Clothing  vs.  S P Apparels

Indian Card Clothing

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Card Clothing are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Indian Card exhibited solid returns over the last few months and may actually be approaching a breakup point.

S P Apparels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indian Card and S P

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

The idea behind Indian Card Clothing and S P Apparels 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..