Correlation Between Sardar Chemical and Indus

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

By analyzing existing cross correlation between Sardar Chemical Industries and Indus Motor, you can compare the effects of market volatilities on Sardar Chemical and Indus 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 Sardar Chemical with a short position of Indus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sardar Chemical and Indus.

Diversification Opportunities for Sardar Chemical and Indus

-0.08

Correlation Coefficient

Sardar Chemical  Indus

Good diversification

The 3 months correlation between Sardar and Indus is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sardar Chemical Industries and Indus Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Motor and Sardar Chemical 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 Sardar Chemical Industries are associated (or correlated) with Indus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Motor has no effect on the direction of Sardar Chemical i.e., Sardar Chemical and Indus go up and down completely randomly.

Pair Corralation between Sardar Chemical and Indus

Assuming the 90 days trading horizon Sardar Chemical Industries is expected to generate 4.42 times more return on investment than Indus. However, Sardar Chemical is 4.42 times more volatile than Indus Motor. It trades about 0.0 of its potential returns per unit of risk. Indus Motor is currently generating about -0.1 per unit of risk. If you would invest  3,667  in Sardar Chemical Industries on December 23, 2024 and sell it today you would lose (195.00) from holding Sardar Chemical Industries or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.37%
Values	Daily Returns

Sardar Chemical Industries  vs.  Indus Motor

Sardar Chemical Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sardar Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sardar Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Indus Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indus Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sardar Chemical and Indus

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

The idea behind Sardar Chemical Industries and Indus Motor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.