Correlation Between NIFTY SUMER and CCL Products

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

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

Diversification Opportunities for NIFTY SUMER and CCL Products

0.11

Correlation Coefficient

NIFTY SUMER  CCL Products

Average diversification

The 3 months correlation between NIFTY and CCL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and CCL Products Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Products Limited and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with CCL Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Products Limited has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and CCL Products go up and down completely randomly.

Pair Corralation between NIFTY SUMER and CCL Products

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.47 times more return on investment than CCL Products. However, NIFTY SUMER DURABLES is 2.15 times less risky than CCL Products. It trades about 0.15 of its potential returns per unit of risk. CCL Products Limited is currently generating about 0.04 per unit of risk. If you would invest  2,379,450  in NIFTY SUMER DURABLES on October 5, 2024 and sell it today you would earn a total of  1,913,070  from holding NIFTY SUMER DURABLES or generate 80.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.1%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  CCL Products Limited

Pair Trading with NIFTY SUMER and CCL Products

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

The idea behind NIFTY SUMER DURABLES and CCL Products 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.