Correlation Between NIFTY SUMER and Ramco Cements

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

Diversification Opportunities for NIFTY SUMER and Ramco Cements

0.49

Correlation Coefficient

NIFTY SUMER  Ramco Cements

Very weak diversification

The 3 months correlation between NIFTY and Ramco is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Ramco Cements go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Ramco Cements

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to under-perform the Ramco Cements. But the index apears to be less risky and, when comparing its historical volatility, NIFTY SUMER DURABLES is 1.49 times less risky than Ramco Cements. The index trades about -0.04 of its potential returns per unit of risk. The The Ramco Cements is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  83,885  in The Ramco Cements on October 23, 2024 and sell it today you would earn a total of  4,520  from holding The Ramco Cements or generate 5.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  The Ramco Cements

Pair Trading with NIFTY SUMER and Ramco Cements

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

The idea behind NIFTY SUMER DURABLES and The Ramco Cements 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.