Correlation Between Shigan Quantum and CEAT

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

By analyzing existing cross correlation between Shigan Quantum Tech and CEAT Limited, you can compare the effects of market volatilities on Shigan Quantum and CEAT 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 Shigan Quantum with a short position of CEAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shigan Quantum and CEAT.

Diversification Opportunities for Shigan Quantum and CEAT

-0.06

Correlation Coefficient

Shigan Quantum  CEAT

Good diversification

The 3 months correlation between Shigan and CEAT is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shigan Quantum Tech and CEAT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEAT Limited and Shigan Quantum 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 Shigan Quantum Tech are associated (or correlated) with CEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEAT Limited has no effect on the direction of Shigan Quantum i.e., Shigan Quantum and CEAT go up and down completely randomly.

Pair Corralation between Shigan Quantum and CEAT

Assuming the 90 days trading horizon Shigan Quantum Tech is expected to generate 1.82 times more return on investment than CEAT. However, Shigan Quantum is 1.82 times more volatile than CEAT Limited. It trades about 0.05 of its potential returns per unit of risk. CEAT Limited is currently generating about 0.1 per unit of risk. If you would invest  11,800  in Shigan Quantum Tech on September 12, 2024 and sell it today you would earn a total of  500.00  from holding Shigan Quantum Tech or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Shigan Quantum Tech  vs.  CEAT Limited

Shigan Quantum Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shigan Quantum Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Shigan Quantum sustained solid returns over the last few months and may actually be approaching a breakup point.

CEAT Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEAT Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, CEAT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shigan Quantum and CEAT

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

The idea behind Shigan Quantum Tech and CEAT 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.