Correlation Between PI Industries and Chambal Fertilizers

Can any of the company-specific risk be diversified away by investing in both PI Industries and Chambal Fertilizers 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 PI Industries and Chambal Fertilizers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PI Industries Limited and Chambal Fertilizers Chemicals, you can compare the effects of market volatilities on PI Industries and Chambal Fertilizers 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 PI Industries with a short position of Chambal Fertilizers. Check out your portfolio center. Please also check ongoing floating volatility patterns of PI Industries and Chambal Fertilizers.

Diversification Opportunities for PI Industries and Chambal Fertilizers

-0.27

Correlation Coefficient

PI Industries  Chambal Fertilizers

Very good diversification

The 3 months correlation between PIIND and Chambal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PI Industries Limited and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers and PI Industries 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 PI Industries Limited are associated (or correlated) with Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of PI Industries i.e., PI Industries and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between PI Industries and Chambal Fertilizers

Assuming the 90 days trading horizon PI Industries Limited is expected to under-perform the Chambal Fertilizers. But the stock apears to be less risky and, when comparing its historical volatility, PI Industries Limited is 1.51 times less risky than Chambal Fertilizers. The stock trades about -0.23 of its potential returns per unit of risk. The Chambal Fertilizers Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  47,473  in Chambal Fertilizers Chemicals on October 5, 2024 and sell it today you would earn a total of  3,157  from holding Chambal Fertilizers Chemicals or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

PI Industries Limited  vs.  Chambal Fertilizers Chemicals

PI Industries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Chambal Fertilizers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Chambal Fertilizers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PI Industries and Chambal Fertilizers

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

The idea behind PI Industries Limited and Chambal Fertilizers Chemicals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.