Correlation Between Shyam Metalics and Punjab Chemicals

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

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

Diversification Opportunities for Shyam Metalics and Punjab Chemicals

0.64

Correlation Coefficient

Shyam Metalics  Punjab Chemicals

Poor diversification

The 3 months correlation between Shyam and Punjab is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Metalics and and Punjab Chemicals Crop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Punjab Chemicals Crop and Shyam Metalics 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 Shyam Metalics and are associated (or correlated) with Punjab Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Punjab Chemicals Crop has no effect on the direction of Shyam Metalics i.e., Shyam Metalics and Punjab Chemicals go up and down completely randomly.

Pair Corralation between Shyam Metalics and Punjab Chemicals

Assuming the 90 days trading horizon Shyam Metalics and is expected to under-perform the Punjab Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Shyam Metalics and is 1.46 times less risky than Punjab Chemicals. The stock trades about -0.17 of its potential returns per unit of risk. The Punjab Chemicals Crop is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  107,305  in Punjab Chemicals Crop on October 12, 2024 and sell it today you would lose (7,545) from holding Punjab Chemicals Crop or give up 7.03% of portfolio value over 90 days.

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

Shyam Metalics and  vs.  Punjab Chemicals Crop

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Punjab Chemicals Crop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Punjab Chemicals Crop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Punjab Chemicals is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shyam Metalics and Punjab Chemicals

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

The idea behind Shyam Metalics and and Punjab Chemicals Crop 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.