Correlation Between Sapphire Foods and Gallantt Ispat

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

Diversification Opportunities for Sapphire Foods and Gallantt Ispat

0.68

Correlation Coefficient

Sapphire Foods  Gallantt Ispat

Poor diversification

The 3 months correlation between Sapphire and Gallantt is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Gallantt Ispat Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gallantt Ispat 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 Gallantt Ispat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gallantt Ispat has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Gallantt Ispat go up and down completely randomly.

Pair Corralation between Sapphire Foods and Gallantt Ispat

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 1.11 times more return on investment than Gallantt Ispat. However, Sapphire Foods is 1.11 times more volatile than Gallantt Ispat Limited. It trades about -0.06 of its potential returns per unit of risk. Gallantt Ispat Limited is currently generating about -0.13 per unit of risk. If you would invest  34,150  in Sapphire Foods India on December 2, 2024 and sell it today you would lose (3,125) from holding Sapphire Foods India or give up 9.15% of portfolio value over 90 days.

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

Sapphire Foods India  vs.  Gallantt Ispat 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.

Gallantt Ispat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gallantt Ispat Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sapphire Foods and Gallantt Ispat

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

The idea behind Sapphire Foods India and Gallantt Ispat 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.