Correlation Between Shivalik Bimetal and Kothari Petrochemicals

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

By analyzing existing cross correlation between Shivalik Bimetal Controls and Kothari Petrochemicals Limited, you can compare the effects of market volatilities on Shivalik Bimetal and Kothari Petrochemicals 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 Shivalik Bimetal with a short position of Kothari Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shivalik Bimetal and Kothari Petrochemicals.

Diversification Opportunities for Shivalik Bimetal and Kothari Petrochemicals

0.55

Correlation Coefficient

Shivalik Bimetal  Kothari Petrochemicals

Very weak diversification

The 3 months correlation between Shivalik and Kothari is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Shivalik Bimetal Controls and Kothari Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kothari Petrochemicals and Shivalik Bimetal 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 Shivalik Bimetal Controls are associated (or correlated) with Kothari Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kothari Petrochemicals has no effect on the direction of Shivalik Bimetal i.e., Shivalik Bimetal and Kothari Petrochemicals go up and down completely randomly.

Pair Corralation between Shivalik Bimetal and Kothari Petrochemicals

Assuming the 90 days trading horizon Shivalik Bimetal Controls is expected to generate 0.85 times more return on investment than Kothari Petrochemicals. However, Shivalik Bimetal Controls is 1.17 times less risky than Kothari Petrochemicals. It trades about 0.07 of its potential returns per unit of risk. Kothari Petrochemicals Limited is currently generating about -0.02 per unit of risk. If you would invest  57,075  in Shivalik Bimetal Controls on September 19, 2024 and sell it today you would earn a total of  5,720  from holding Shivalik Bimetal Controls or generate 10.02% return on investment over 90 days.

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

Shivalik Bimetal Controls  vs.  Kothari Petrochemicals Limited

Shivalik Bimetal Controls

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shivalik Bimetal Controls are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Shivalik Bimetal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kothari Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kothari Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Kothari Petrochemicals is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Shivalik Bimetal and Kothari Petrochemicals

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

The idea behind Shivalik Bimetal Controls and Kothari Petrochemicals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.