Correlation Between Sarthak Metals and Zydus Wellness

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

Diversification Opportunities for Sarthak Metals and Zydus Wellness

-0.15

Correlation Coefficient

Sarthak Metals  Zydus Wellness

Good diversification

The 3 months correlation between Sarthak and Zydus is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Zydus Wellness Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zydus Wellness 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 Zydus Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zydus Wellness has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Zydus Wellness go up and down completely randomly.

Pair Corralation between Sarthak Metals and Zydus Wellness

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to generate 1.53 times more return on investment than Zydus Wellness. However, Sarthak Metals is 1.53 times more volatile than Zydus Wellness Limited. It trades about 0.39 of its potential returns per unit of risk. Zydus Wellness Limited is currently generating about 0.1 per unit of risk. If you would invest  14,729  in Sarthak Metals Limited on September 15, 2024 and sell it today you would earn a total of  2,696  from holding Sarthak Metals Limited or generate 18.3% 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.  Zydus Wellness Limited

Sarthak Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sarthak Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Zydus Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zydus Wellness Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sarthak Metals and Zydus Wellness

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

The idea behind Sarthak Metals Limited and Zydus Wellness 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.