Correlation Between Speciality Restaurants and IG Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Speciality Restaurants and IG Petrochemicals 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 Speciality Restaurants and IG Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Speciality Restaurants and IG Petrochemicals

0.2

Correlation Coefficient

Speciality Restaurants  IG Petrochemicals

Modest diversification

The 3 months correlation between Speciality and IGPL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and IG Petrochemicals go up and down completely randomly.

Pair Corralation between Speciality Restaurants and IG Petrochemicals

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the IG Petrochemicals. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.03 times less risky than IG Petrochemicals. The stock trades about -0.05 of its potential returns per unit of risk. The IG Petrochemicals Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  49,506  in IG Petrochemicals Limited on October 10, 2024 and sell it today you would earn a total of  3,549  from holding IG Petrochemicals Limited or generate 7.17% return on investment over 90 days.

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

Speciality Restaurants Limited  vs.  IG Petrochemicals Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants 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 forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Speciality Restaurants and IG Petrochemicals

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

The idea behind Speciality Restaurants Limited and IG Petrochemicals 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.