Correlation Between ILFS Investment and Gillette India

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

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

Diversification Opportunities for ILFS Investment and Gillette India

0.38

Correlation Coefficient

ILFS Investment  Gillette India

Weak diversification

The 3 months correlation between ILFS and Gillette is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ILFS Investment Managers and Gillette India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gillette India and ILFS Investment 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 ILFS Investment Managers are associated (or correlated) with Gillette India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gillette India has no effect on the direction of ILFS Investment i.e., ILFS Investment and Gillette India go up and down completely randomly.

Pair Corralation between ILFS Investment and Gillette India

Assuming the 90 days trading horizon ILFS Investment is expected to generate 1.05 times less return on investment than Gillette India. In addition to that, ILFS Investment is 1.75 times more volatile than Gillette India Limited. It trades about 0.05 of its total potential returns per unit of risk. Gillette India Limited is currently generating about 0.09 per unit of volatility. If you would invest  481,235  in Gillette India Limited on October 11, 2024 and sell it today you would earn a total of  492,955  from holding Gillette India Limited or generate 102.44% return on investment over 90 days.

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

ILFS Investment Managers  vs.  Gillette India Limited

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Gillette India

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gillette India may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ILFS Investment and Gillette India

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

The idea behind ILFS Investment Managers and Gillette India 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.