Correlation Between Indo Borax and Niraj Ispat

Can any of the company-specific risk be diversified away by investing in both Indo Borax and Niraj Ispat 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 Indo Borax and Niraj Ispat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Borax Chemicals and Niraj Ispat Industries, you can compare the effects of market volatilities on Indo Borax and Niraj Ispat 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 Indo Borax with a short position of Niraj Ispat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Borax and Niraj Ispat.

Diversification Opportunities for Indo Borax and Niraj Ispat

-0.52

Correlation Coefficient

Indo Borax  Niraj Ispat

Excellent diversification

The 3 months correlation between Indo and Niraj is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and Niraj Ispat Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niraj Ispat Industries and Indo Borax 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 Indo Borax Chemicals are associated (or correlated) with Niraj Ispat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niraj Ispat Industries has no effect on the direction of Indo Borax i.e., Indo Borax and Niraj Ispat go up and down completely randomly.

Pair Corralation between Indo Borax and Niraj Ispat

Assuming the 90 days trading horizon Indo Borax is expected to generate 21.37 times less return on investment than Niraj Ispat. In addition to that, Indo Borax is 2.23 times more volatile than Niraj Ispat Industries. It trades about 0.0 of its total potential returns per unit of risk. Niraj Ispat Industries is currently generating about 0.22 per unit of volatility. If you would invest  20,421  in Niraj Ispat Industries on October 5, 2024 and sell it today you would earn a total of  4,097  from holding Niraj Ispat Industries or generate 20.06% return on investment over 90 days.

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

Indo Borax Chemicals  vs.  Niraj Ispat Industries

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Niraj Ispat Industries

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Niraj Ispat Industries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Niraj Ispat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Borax and Niraj Ispat

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

The idea behind Indo Borax Chemicals and Niraj Ispat Industries 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.