Correlation Between Sarthak Metals and Dhanuka Agritech

Can any of the company-specific risk be diversified away by investing in both Sarthak Metals and Dhanuka Agritech 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 Dhanuka Agritech 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 Dhanuka Agritech Limited, you can compare the effects of market volatilities on Sarthak Metals and Dhanuka Agritech 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 Dhanuka Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarthak Metals and Dhanuka Agritech.

Diversification Opportunities for Sarthak Metals and Dhanuka Agritech

-0.13

Correlation Coefficient

Sarthak Metals  Dhanuka Agritech

Good diversification

The 3 months correlation between Sarthak and Dhanuka is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Dhanuka Agritech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhanuka Agritech 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 Dhanuka Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhanuka Agritech has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Dhanuka Agritech go up and down completely randomly.

Pair Corralation between Sarthak Metals and Dhanuka Agritech

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the Dhanuka Agritech. In addition to that, Sarthak Metals is 1.06 times more volatile than Dhanuka Agritech Limited. It trades about -0.04 of its total potential returns per unit of risk. Dhanuka Agritech Limited is currently generating about 0.12 per unit of volatility. If you would invest  95,983  in Dhanuka Agritech Limited on September 20, 2024 and sell it today you would earn a total of  62,807  from holding Dhanuka Agritech Limited or generate 65.44% return on investment over 90 days.

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

Sarthak Metals Limited  vs.  Dhanuka Agritech Limited

Sarthak Metals

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Sarthak Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dhanuka Agritech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dhanuka Agritech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dhanuka Agritech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sarthak Metals and Dhanuka Agritech

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

The idea behind Sarthak Metals Limited and Dhanuka Agritech 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.