Correlation Between Indo Borax and Tilaknagar Industries

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

Diversification Opportunities for Indo Borax and Tilaknagar Industries

-0.19

Correlation Coefficient

Indo Borax  Tilaknagar Industries

Good diversification

The 3 months correlation between Indo and Tilaknagar is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and Tilaknagar Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tilaknagar 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 Tilaknagar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tilaknagar Industries has no effect on the direction of Indo Borax i.e., Indo Borax and Tilaknagar Industries go up and down completely randomly.

Pair Corralation between Indo Borax and Tilaknagar Industries

Assuming the 90 days trading horizon Indo Borax is expected to generate 2.92 times less return on investment than Tilaknagar Industries. But when comparing it to its historical volatility, Indo Borax Chemicals is 1.01 times less risky than Tilaknagar Industries. It trades about 0.04 of its potential returns per unit of risk. Tilaknagar Industries Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12,071  in Tilaknagar Industries Limited on October 5, 2024 and sell it today you would earn a total of  33,324  from holding Tilaknagar Industries Limited or generate 276.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Indo Borax Chemicals  vs.  Tilaknagar Industries Limited

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.

Tilaknagar Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tilaknagar Industries Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Tilaknagar Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Borax and Tilaknagar Industries

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

The idea behind Indo Borax Chemicals and Tilaknagar Industries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.