Correlation Between Energy Services and Alps/kotak India

Can any of the company-specific risk be diversified away by investing in both Energy Services and Alps/kotak India 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 Energy Services and Alps/kotak India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Services Fund and Alpskotak India Growth, you can compare the effects of market volatilities on Energy Services and Alps/kotak India 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 Energy Services with a short position of Alps/kotak India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Alps/kotak India.

Diversification Opportunities for Energy Services and Alps/kotak India

0.44

Correlation Coefficient

Energy Services  Alps/kotak India

Very weak diversification

The 3 months correlation between Energy and ALPS/KOTAK is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Alpskotak India Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpskotak India Growth and Energy Services 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 Energy Services Fund are associated (or correlated) with Alps/kotak India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpskotak India Growth has no effect on the direction of Energy Services i.e., Energy Services and Alps/kotak India go up and down completely randomly.

Pair Corralation between Energy Services and Alps/kotak India

Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Alps/kotak India. In addition to that, Energy Services is 1.73 times more volatile than Alpskotak India Growth. It trades about -0.06 of its total potential returns per unit of risk. Alpskotak India Growth is currently generating about -0.07 per unit of volatility. If you would invest  1,438  in Alpskotak India Growth on December 30, 2024 and sell it today you would lose (66.00) from holding Alpskotak India Growth or give up 4.59% of portfolio value over 90 days.

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

Energy Services Fund  vs.  Alpskotak India Growth

Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Services Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Energy Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alpskotak India Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpskotak India Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Alps/kotak India is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Services and Alps/kotak India

The main advantage of trading using opposite Energy Services and Alps/kotak India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services position performs unexpectedly, Alps/kotak India 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 Alps/kotak India will offset losses from the drop in Alps/kotak India's long position.

The idea behind Energy Services Fund and Alpskotak India Growth 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .