Correlation Between Spencers Retail and Gujarat Lease

Can any of the company-specific risk be diversified away by investing in both Spencers Retail and Gujarat Lease 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 Spencers Retail and Gujarat Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spencers Retail Limited and Gujarat Lease Financing, you can compare the effects of market volatilities on Spencers Retail and Gujarat Lease 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 Spencers Retail with a short position of Gujarat Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and Gujarat Lease.

Diversification Opportunities for Spencers Retail and Gujarat Lease

-0.25

Correlation Coefficient

Spencers Retail  Gujarat Lease

Very good diversification

The 3 months correlation between Spencers and Gujarat is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Spencers Retail 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 Spencers Retail Limited are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Spencers Retail i.e., Spencers Retail and Gujarat Lease go up and down completely randomly.

Pair Corralation between Spencers Retail and Gujarat Lease

Assuming the 90 days trading horizon Spencers Retail is expected to generate 6.51 times less return on investment than Gujarat Lease. But when comparing it to its historical volatility, Spencers Retail Limited is 1.39 times less risky than Gujarat Lease. It trades about 0.04 of its potential returns per unit of risk. Gujarat Lease Financing is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Gujarat Lease Financing on September 21, 2024 and sell it today you would earn a total of  79.00  from holding Gujarat Lease Financing or generate 11.45% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Gujarat Lease Financing

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Gujarat Lease Financing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spencers Retail and Gujarat Lease

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

The idea behind Spencers Retail Limited and Gujarat Lease Financing 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.