Correlation Between SBI Cards and Chemcon Speciality

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

By analyzing existing cross correlation between SBI Cards and and Chemcon Speciality Chemicals, you can compare the effects of market volatilities on SBI Cards and Chemcon Speciality 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 SBI Cards with a short position of Chemcon Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Cards and Chemcon Speciality.

Diversification Opportunities for SBI Cards and Chemcon Speciality

0.84

Correlation Coefficient

SBI Cards  Chemcon Speciality

Very poor diversification

The 3 months correlation between SBI and Chemcon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SBI Cards and and Chemcon Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemcon Speciality and SBI Cards 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 SBI Cards and are associated (or correlated) with Chemcon Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemcon Speciality has no effect on the direction of SBI Cards i.e., SBI Cards and Chemcon Speciality go up and down completely randomly.

Pair Corralation between SBI Cards and Chemcon Speciality

Assuming the 90 days trading horizon SBI Cards and is expected to under-perform the Chemcon Speciality. But the stock apears to be less risky and, when comparing its historical volatility, SBI Cards and is 1.13 times less risky than Chemcon Speciality. The stock trades about -0.21 of its potential returns per unit of risk. The Chemcon Speciality Chemicals is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  23,530  in Chemcon Speciality Chemicals on September 29, 2024 and sell it today you would lose (910.00) from holding Chemcon Speciality Chemicals or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

SBI Cards and  vs.  Chemcon Speciality Chemicals

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Cards and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SBI Cards and Chemcon Speciality

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

The idea behind SBI Cards and and Chemcon Speciality Chemicals 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.