Correlation Between Credo Brands and Suzlon Energy

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

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

Diversification Opportunities for Credo Brands and Suzlon Energy

0.58

Correlation Coefficient

Credo Brands  Suzlon Energy

Very weak diversification

The 3 months correlation between Credo and Suzlon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Credo Brands Marketing and Suzlon Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzlon Energy Limited and Credo Brands 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 Credo Brands Marketing are associated (or correlated) with Suzlon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzlon Energy Limited has no effect on the direction of Credo Brands i.e., Credo Brands and Suzlon Energy go up and down completely randomly.

Pair Corralation between Credo Brands and Suzlon Energy

Assuming the 90 days trading horizon Credo Brands Marketing is expected to generate 1.32 times more return on investment than Suzlon Energy. However, Credo Brands is 1.32 times more volatile than Suzlon Energy Limited. It trades about -0.15 of its potential returns per unit of risk. Suzlon Energy Limited is currently generating about -0.24 per unit of risk. If you would invest  19,338  in Credo Brands Marketing on October 6, 2024 and sell it today you would lose (1,483) from holding Credo Brands Marketing or give up 7.67% of portfolio value over 90 days.

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

Credo Brands Marketing  vs.  Suzlon Energy Limited

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Credo Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Suzlon Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzlon Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Credo Brands and Suzlon Energy

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

The idea behind Credo Brands Marketing and Suzlon Energy 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.

Check out your portfolio center.

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.