Correlation Between POWERGRID Infrastructure and Gujarat Alkalies

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

Diversification Opportunities for POWERGRID Infrastructure and Gujarat Alkalies

0.88

Correlation Coefficient

POWERGRID Infrastructure  Gujarat Alkalies

Very poor diversification

The 3 months correlation between POWERGRID and Gujarat is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding POWERGRID Infrastructure Inves and Gujarat Alkalies and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Alkalies 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 Gujarat Alkalies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Alkalies has no effect on the direction of POWERGRID Infrastructure i.e., POWERGRID Infrastructure and Gujarat Alkalies go up and down completely randomly.

Pair Corralation between POWERGRID Infrastructure and Gujarat Alkalies

Assuming the 90 days trading horizon POWERGRID Infrastructure Investment is expected to generate 0.34 times more return on investment than Gujarat Alkalies. However, POWERGRID Infrastructure Investment is 2.94 times less risky than Gujarat Alkalies. It trades about -0.2 of its potential returns per unit of risk. Gujarat Alkalies and is currently generating about -0.14 per unit of risk. If you would invest  8,486  in POWERGRID Infrastructure Investment on December 30, 2024 and sell it today you would lose (887.00) from holding POWERGRID Infrastructure Investment or give up 10.45% of portfolio value over 90 days.

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

POWERGRID Infrastructure Inves  vs.  Gujarat Alkalies and

POWERGRID Infrastructure

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Gujarat Alkalies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with POWERGRID Infrastructure and Gujarat Alkalies

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

The idea behind POWERGRID Infrastructure Investment and Gujarat Alkalies and 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.