Correlation Between ILFS Investment and POWERGRID Infrastructure

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

Diversification Opportunities for ILFS Investment and POWERGRID Infrastructure

0.38

Correlation Coefficient

ILFS Investment  POWERGRID Infrastructure

Weak diversification

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

Pair Corralation between ILFS Investment and POWERGRID Infrastructure

Assuming the 90 days trading horizon ILFS Investment Managers is expected to generate 6.76 times more return on investment than POWERGRID Infrastructure. However, ILFS Investment is 6.76 times more volatile than POWERGRID Infrastructure Investment. It trades about 0.15 of its potential returns per unit of risk. POWERGRID Infrastructure Investment is currently generating about 0.05 per unit of risk. If you would invest  1,055  in ILFS Investment Managers on September 21, 2024 and sell it today you would earn a total of  77.00  from holding ILFS Investment Managers or generate 7.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

ILFS Investment Managers  vs.  POWERGRID Infrastructure Inves

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 rather sound technical and fundamental indicators, ILFS Investment is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

POWERGRID Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POWERGRID Infrastructure Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, POWERGRID Infrastructure 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 ILFS Investment and POWERGRID Infrastructure

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

The idea behind ILFS Investment Managers and POWERGRID Infrastructure Investment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.