Correlation Between Praj Industries and Indo Borax

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

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

Diversification Opportunities for Praj Industries and Indo Borax

0.29

Correlation Coefficient

Praj Industries  Indo Borax

Modest diversification

The 3 months correlation between Praj and Indo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Praj Industries Limited and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals and Praj 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 Praj Industries Limited are associated (or correlated) with Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of Praj Industries i.e., Praj Industries and Indo Borax go up and down completely randomly.

Pair Corralation between Praj Industries and Indo Borax

Assuming the 90 days trading horizon Praj Industries Limited is expected to generate 0.85 times more return on investment than Indo Borax. However, Praj Industries Limited is 1.17 times less risky than Indo Borax. It trades about 0.1 of its potential returns per unit of risk. Indo Borax Chemicals is currently generating about 0.05 per unit of risk. If you would invest  32,820  in Praj Industries Limited on October 5, 2024 and sell it today you would earn a total of  50,815  from holding Praj Industries Limited or generate 154.83% return on investment over 90 days.

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

Praj Industries Limited  vs.  Indo Borax Chemicals

Praj Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Praj Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Praj Industries and Indo Borax

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

The idea behind Praj Industries Limited and Indo Borax 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.