Correlation Between Sarveshwar Foods and Selan Exploration

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

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

Diversification Opportunities for Sarveshwar Foods and Selan Exploration

0.49

Correlation Coefficient

Sarveshwar Foods  Selan Exploration

Very weak diversification

The 3 months correlation between Sarveshwar and Selan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sarveshwar Foods Limited and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration and Sarveshwar 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 Sarveshwar Foods Limited are associated (or correlated) with Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of Sarveshwar Foods i.e., Sarveshwar Foods and Selan Exploration go up and down completely randomly.

Pair Corralation between Sarveshwar Foods and Selan Exploration

Assuming the 90 days trading horizon Sarveshwar Foods Limited is expected to under-perform the Selan Exploration. In addition to that, Sarveshwar Foods is 1.16 times more volatile than Selan Exploration Technology. It trades about -0.38 of its total potential returns per unit of risk. Selan Exploration Technology is currently generating about -0.18 per unit of volatility. If you would invest  91,155  in Selan Exploration Technology on October 11, 2024 and sell it today you would lose (9,080) from holding Selan Exploration Technology or give up 9.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Sarveshwar Foods Limited  vs.  Selan Exploration Technology

Sarveshwar Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarveshwar Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Selan Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Selan Exploration is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sarveshwar Foods and Selan Exploration

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

The idea behind Sarveshwar Foods Limited and Selan Exploration Technology 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.