Correlation Between Sapphire Foods and Bosch

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

By analyzing existing cross correlation between Sapphire Foods India and Bosch Limited, you can compare the effects of market volatilities on Sapphire Foods and Bosch 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 Sapphire Foods with a short position of Bosch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapphire Foods and Bosch.

Diversification Opportunities for Sapphire Foods and Bosch

0.6

Correlation Coefficient

Sapphire Foods  Bosch

Poor diversification

The 3 months correlation between Sapphire and Bosch is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Bosch Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosch Limited and Sapphire Foods 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 Sapphire Foods India are associated (or correlated) with Bosch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosch Limited has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Bosch go up and down completely randomly.

Pair Corralation between Sapphire Foods and Bosch

Assuming the 90 days trading horizon Sapphire Foods is expected to generate 1.34 times less return on investment than Bosch. In addition to that, Sapphire Foods is 1.33 times more volatile than Bosch Limited. It trades about 0.02 of its total potential returns per unit of risk. Bosch Limited is currently generating about 0.04 per unit of volatility. If you would invest  3,372,075  in Bosch Limited on September 5, 2024 and sell it today you would earn a total of  120,295  from holding Bosch Limited or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sapphire Foods India  vs.  Bosch Limited

Sapphire Foods India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sapphire Foods India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Bosch Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bosch Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Bosch is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sapphire Foods and Bosch

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

The idea behind Sapphire Foods India and Bosch Limited 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.