Correlation Between NIFTY SUMER and Manali Petrochemicals

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

Diversification Opportunities for NIFTY SUMER and Manali Petrochemicals

0.13

Correlation Coefficient

NIFTY SUMER  Manali Petrochemicals

Average diversification

The 3 months correlation between NIFTY and Manali is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Manali Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manali Petrochemicals 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 Manali Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manali Petrochemicals has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Manali Petrochemicals go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Manali Petrochemicals

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to under-perform the Manali Petrochemicals. But the index apears to be less risky and, when comparing its historical volatility, NIFTY SUMER DURABLES is 1.42 times less risky than Manali Petrochemicals. The index trades about -0.15 of its potential returns per unit of risk. The Manali Petrochemicals Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  6,280  in Manali Petrochemicals Limited on December 28, 2024 and sell it today you would lose (483.00) from holding Manali Petrochemicals Limited or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  Manali Petrochemicals Limited

Pair Trading with NIFTY SUMER and Manali Petrochemicals

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

The idea behind NIFTY SUMER DURABLES and Manali Petrochemicals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.