Correlation Between POWERGRID Infrastructure and Golden Tobacco

Can any of the company-specific risk be diversified away by investing in both POWERGRID Infrastructure and Golden Tobacco 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 POWERGRID Infrastructure and Golden Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between POWERGRID Infrastructure Investment and Golden Tobacco Limited, you can compare the effects of market volatilities on POWERGRID Infrastructure and Golden Tobacco 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 POWERGRID Infrastructure with a short position of Golden Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of POWERGRID Infrastructure and Golden Tobacco.

Diversification Opportunities for POWERGRID Infrastructure and Golden Tobacco

0.18

Correlation Coefficient

POWERGRID Infrastructure  Golden Tobacco

Average diversification

The 3 months correlation between POWERGRID and Golden is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding POWERGRID Infrastructure Inves and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and POWERGRID Infrastructure 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 POWERGRID Infrastructure Investment are associated (or correlated) with Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of POWERGRID Infrastructure i.e., POWERGRID Infrastructure and Golden Tobacco go up and down completely randomly.

Pair Corralation between POWERGRID Infrastructure and Golden Tobacco

Assuming the 90 days trading horizon POWERGRID Infrastructure is expected to generate 9.59 times less return on investment than Golden Tobacco. But when comparing it to its historical volatility, POWERGRID Infrastructure Investment is 6.68 times less risky than Golden Tobacco. It trades about 0.05 of its potential returns per unit of risk. Golden Tobacco Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,937  in Golden Tobacco Limited on September 21, 2024 and sell it today you would earn a total of  118.00  from holding Golden Tobacco Limited or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

POWERGRID Infrastructure Inves  vs.  Golden Tobacco Limited

POWERGRID Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POWERGRID Infrastructure Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, POWERGRID Infrastructure is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with POWERGRID Infrastructure and Golden Tobacco

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

The idea behind POWERGRID Infrastructure Investment and Golden Tobacco 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.