Correlation Between Sarthak Metals and Diamond Power

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

Diversification Opportunities for Sarthak Metals and Diamond Power

-0.17

Correlation Coefficient

Sarthak Metals  Diamond Power

Good diversification

The 3 months correlation between Sarthak and Diamond is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Diamond Power Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Power Infras 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 Diamond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Power Infras has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Diamond Power go up and down completely randomly.

Pair Corralation between Sarthak Metals and Diamond Power

Assuming the 90 days trading horizon Sarthak Metals is expected to generate 54.47 times less return on investment than Diamond Power. But when comparing it to its historical volatility, Sarthak Metals Limited is 102.6 times less risky than Diamond Power. It trades about 0.37 of its potential returns per unit of risk. Diamond Power Infrastructure is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15,180  in Diamond Power Infrastructure on September 18, 2024 and sell it today you would earn a total of  1,225  from holding Diamond Power Infrastructure or generate 8.07% 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.  Diamond Power Infrastructure

Sarthak Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sarthak Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sarthak Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Diamond Power Infras

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Power Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarthak Metals and Diamond Power

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

The idea behind Sarthak Metals Limited and Diamond Power Infrastructure 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.