Correlation Between NIFTY SUMER and SEPC

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

Diversification Opportunities for NIFTY SUMER and SEPC

0.95

Correlation Coefficient

NIFTY SUMER  SEPC

Almost no diversification

The 3 months correlation between NIFTY and SEPC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and SEPC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEPC 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 SEPC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEPC Limited has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and SEPC go up and down completely randomly.

Pair Corralation between NIFTY SUMER and SEPC

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.35 times more return on investment than SEPC. However, NIFTY SUMER DURABLES is 2.89 times less risky than SEPC. It trades about -0.14 of its potential returns per unit of risk. SEPC Limited is currently generating about -0.1 per unit of risk. If you would invest  4,165,050  in NIFTY SUMER DURABLES on December 23, 2024 and sell it today you would lose (540,010) from holding NIFTY SUMER DURABLES or give up 12.97% of portfolio value over 90 days.

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

NIFTY SUMER DURABLES  vs.  SEPC Limited

Pair Trading with NIFTY SUMER and SEPC

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

The idea behind NIFTY SUMER DURABLES and SEPC 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.