Correlation Between Malu Paper and Gillette India

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

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

Diversification Opportunities for Malu Paper and Gillette India

0.14

Correlation Coefficient

Malu Paper  Gillette India

Average diversification

The 3 months correlation between Malu and Gillette is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Malu Paper Mills and Gillette India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gillette India and Malu Paper 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 Malu Paper Mills 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 Malu Paper i.e., Malu Paper and Gillette India go up and down completely randomly.

Pair Corralation between Malu Paper and Gillette India

Assuming the 90 days trading horizon Malu Paper is expected to generate 3.82 times less return on investment than Gillette India. In addition to that, Malu Paper is 1.47 times more volatile than Gillette India Limited. It trades about 0.01 of its total potential returns per unit of risk. Gillette India Limited is currently generating about 0.05 per unit of volatility. If you would invest  849,942  in Gillette India Limited on September 25, 2024 and sell it today you would earn a total of  58,613  from holding Gillette India Limited or generate 6.9% return on investment over 90 days.

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

Malu Paper Mills  vs.  Gillette India Limited

Malu Paper Mills

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gillette India

Risk-Adjusted Performance

4 of 100

Weak

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 uncertain basic indicators, Gillette India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Malu Paper and Gillette India

The main advantage of trading using opposite Malu Paper and Gillette India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malu Paper 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 Malu Paper Mills 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.