Correlation Between Sapphire Foods and Gujarat Alkalies

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

Diversification Opportunities for Sapphire Foods and Gujarat Alkalies

0.4

Correlation Coefficient

Sapphire Foods  Gujarat Alkalies

Very weak diversification

The 3 months correlation between Sapphire and Gujarat is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Gujarat Alkalies and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Alkalies 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 Gujarat Alkalies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Alkalies has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Gujarat Alkalies go up and down completely randomly.

Pair Corralation between Sapphire Foods and Gujarat Alkalies

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 1.2 times more return on investment than Gujarat Alkalies. However, Sapphire Foods is 1.2 times more volatile than Gujarat Alkalies and. It trades about -0.05 of its potential returns per unit of risk. Gujarat Alkalies and is currently generating about -0.14 per unit of risk. If you would invest  33,265  in Sapphire Foods India on December 28, 2024 and sell it today you would lose (3,820) from holding Sapphire Foods India or give up 11.48% of portfolio value over 90 days.

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

Sapphire Foods India  vs.  Gujarat Alkalies and

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 latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Gujarat Alkalies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 Gujarat Alkalies

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

The idea behind Sapphire Foods India and Gujarat Alkalies and 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.