Correlation Between Indraprastha Medical and CEAT

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

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

Diversification Opportunities for Indraprastha Medical and CEAT

0.83

Correlation Coefficient

Indraprastha Medical  CEAT

Very poor diversification

The 3 months correlation between Indraprastha and CEAT is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Indraprastha Medical and CEAT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEAT Limited and Indraprastha Medical 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 Indraprastha Medical are associated (or correlated) with CEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEAT Limited has no effect on the direction of Indraprastha Medical i.e., Indraprastha Medical and CEAT go up and down completely randomly.

Pair Corralation between Indraprastha Medical and CEAT

Assuming the 90 days trading horizon Indraprastha Medical is expected to generate 1.45 times more return on investment than CEAT. However, Indraprastha Medical is 1.45 times more volatile than CEAT Limited. It trades about 0.1 of its potential returns per unit of risk. CEAT Limited is currently generating about 0.04 per unit of risk. If you would invest  39,545  in Indraprastha Medical on October 22, 2024 and sell it today you would earn a total of  7,765  from holding Indraprastha Medical or generate 19.64% return on investment over 90 days.

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

Indraprastha Medical  vs.  CEAT Limited

Indraprastha Medical

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indraprastha Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Indraprastha Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

CEAT Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CEAT Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, CEAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Indraprastha Medical and CEAT

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

The idea behind Indraprastha Medical and CEAT 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.