Correlation Between Sarthak Metals and Centum Electronics

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

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

Diversification Opportunities for Sarthak Metals and Centum Electronics

0.76

Correlation Coefficient

Sarthak Metals  Centum Electronics

Poor diversification

The 3 months correlation between Sarthak and Centum is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Centum Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centum Electronics and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with Centum Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centum Electronics has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Centum Electronics go up and down completely randomly.

Pair Corralation between Sarthak Metals and Centum Electronics

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the Centum Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Sarthak Metals Limited is 1.18 times less risky than Centum Electronics. The stock trades about -0.14 of its potential returns per unit of risk. The Centum Electronics Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  220,480  in Centum Electronics Limited on December 25, 2024 and sell it today you would lose (56,820) from holding Centum Electronics Limited or give up 25.77% of portfolio value over 90 days.

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

Sarthak Metals Limited  vs.  Centum Electronics Limited

Sarthak Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sarthak Metals Limited 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Centum Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centum Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sarthak Metals and Centum Electronics

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

The idea behind Sarthak Metals Limited and Centum Electronics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.