Correlation Between PI Industries and Chembond Chemicals

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

Diversification Opportunities for PI Industries and Chembond Chemicals

0.65

Correlation Coefficient

PI Industries  Chembond Chemicals

Poor diversification

The 3 months correlation between PIIND and Chembond is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PI Industries Limited and Chembond Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembond Chemicals 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 Chembond Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembond Chemicals has no effect on the direction of PI Industries i.e., PI Industries and Chembond Chemicals go up and down completely randomly.

Pair Corralation between PI Industries and Chembond Chemicals

Assuming the 90 days trading horizon PI Industries Limited is expected to generate 0.87 times more return on investment than Chembond Chemicals. However, PI Industries Limited is 1.15 times less risky than Chembond Chemicals. It trades about -0.07 of its potential returns per unit of risk. Chembond Chemicals is currently generating about -0.1 per unit of risk. If you would invest  373,903  in PI Industries Limited on December 26, 2024 and sell it today you would lose (31,098) from holding PI Industries Limited or give up 8.32% of portfolio value over 90 days.

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

PI Industries Limited  vs.  Chembond Chemicals

PI Industries Limited

Risk-Adjusted Performance

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 latest fragile performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Chembond Chemicals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PI Industries and Chembond Chemicals

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

The idea behind PI Industries Limited and Chembond 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.