Correlation Between Som Distilleries and Engineers India

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

By analyzing existing cross correlation between Som Distilleries Breweries and Engineers India Limited, you can compare the effects of market volatilities on Som Distilleries and Engineers India 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 Som Distilleries with a short position of Engineers India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Som Distilleries and Engineers India.

Diversification Opportunities for Som Distilleries and Engineers India

0.53

Correlation Coefficient

Som Distilleries  Engineers India

Very weak diversification

The 3 months correlation between Som and Engineers is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Som Distilleries Breweries and Engineers India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engineers India and Som Distilleries 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 Som Distilleries Breweries are associated (or correlated) with Engineers India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engineers India has no effect on the direction of Som Distilleries i.e., Som Distilleries and Engineers India go up and down completely randomly.

Pair Corralation between Som Distilleries and Engineers India

Assuming the 90 days trading horizon Som Distilleries Breweries is expected to generate 1.34 times more return on investment than Engineers India. However, Som Distilleries is 1.34 times more volatile than Engineers India Limited. It trades about 0.17 of its potential returns per unit of risk. Engineers India Limited is currently generating about -0.27 per unit of risk. If you would invest  10,706  in Som Distilleries Breweries on October 5, 2024 and sell it today you would earn a total of  926.00  from holding Som Distilleries Breweries or generate 8.65% return on investment over 90 days.

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

Som Distilleries Breweries  vs.  Engineers India Limited

Som Distilleries Bre

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Som Distilleries Breweries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Som Distilleries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Engineers India is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Som Distilleries and Engineers India

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

The idea behind Som Distilleries Breweries and Engineers India 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.