Correlation Between Sarthak Metals and Ramco Cements

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

Diversification Opportunities for Sarthak Metals and Ramco Cements

-0.37

Correlation Coefficient

Sarthak Metals  Ramco Cements

Very good diversification

The 3 months correlation between Sarthak and Ramco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Ramco Cements go up and down completely randomly.

Pair Corralation between Sarthak Metals and Ramco Cements

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to generate 1.87 times more return on investment than Ramco Cements. However, Sarthak Metals is 1.87 times more volatile than The Ramco Cements. It trades about 0.1 of its potential returns per unit of risk. The Ramco Cements is currently generating about -0.21 per unit of risk. If you would invest  15,878  in Sarthak Metals Limited on October 26, 2024 and sell it today you would earn a total of  966.00  from holding Sarthak Metals Limited or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Sarthak Metals Limited  vs.  The Ramco Cements

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Ramco Cements

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Ramco Cements are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ramco Cements may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sarthak Metals and Ramco Cements

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

The idea behind Sarthak Metals Limited and The Ramco Cements 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.