Correlation Between Sapphire Foods and Centum Electronics

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

Diversification Opportunities for Sapphire Foods and Centum Electronics

0.33

Correlation Coefficient

Sapphire Foods  Centum Electronics

Weak diversification

The 3 months correlation between Sapphire and Centum is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Centum Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centum Electronics 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 Centum Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centum Electronics has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Centum Electronics go up and down completely randomly.

Pair Corralation between Sapphire Foods and Centum Electronics

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 0.8 times more return on investment than Centum Electronics. However, Sapphire Foods India is 1.25 times less risky than Centum Electronics. It trades about -0.01 of its potential returns per unit of risk. Centum Electronics Limited is currently generating about -0.11 per unit of risk. If you would invest  32,125  in Sapphire Foods India on December 25, 2024 and sell it today you would lose (1,385) from holding Sapphire Foods India or give up 4.31% of portfolio value over 90 days.

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

Sapphire Foods India  vs.  Centum Electronics Limited

Sapphire Foods India

Risk-Adjusted Performance

Very Weak

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

Centum Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centum Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sapphire Foods and Centum Electronics

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

The idea behind Sapphire Foods India and Centum Electronics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.