Correlation Between Sandhar Technologies and Mangalore Chemicals

Can any of the company-specific risk be diversified away by investing in both Sandhar Technologies and Mangalore 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 Sandhar Technologies and Mangalore Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sandhar Technologies and Mangalore Chemicals

0.17

Correlation Coefficient

Sandhar Technologies  Mangalore Chemicals

Average diversification

The 3 months correlation between Sandhar and Mangalore is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sandhar Technologies Limited and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals and Sandhar Technologies 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 Sandhar Technologies Limited are associated (or correlated) with Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Sandhar Technologies i.e., Sandhar Technologies and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Sandhar Technologies and Mangalore Chemicals

Assuming the 90 days trading horizon Sandhar Technologies Limited is expected to under-perform the Mangalore Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Sandhar Technologies Limited is 1.02 times less risky than Mangalore Chemicals. The stock trades about -0.04 of its potential returns per unit of risk. The Mangalore Chemicals Fertilizers is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,644  in Mangalore Chemicals Fertilizers on September 30, 2024 and sell it today you would earn a total of  3,083  from holding Mangalore Chemicals Fertilizers or generate 24.38% return on investment over 90 days.

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

Sandhar Technologies Limited  vs.  Mangalore Chemicals Fertilizer

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mangalore Chemicals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandhar Technologies and Mangalore Chemicals

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

The idea behind Sandhar Technologies Limited and Mangalore Chemicals Fertilizers 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.