Correlation Between Spencers Retail and Gujarat Alkalies

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

Diversification Opportunities for Spencers Retail and Gujarat Alkalies

0.94

Correlation Coefficient

Spencers Retail  Gujarat Alkalies

Almost no diversification

The 3 months correlation between Spencers and Gujarat is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Gujarat Alkalies and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Alkalies 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 Alkalies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Alkalies has no effect on the direction of Spencers Retail i.e., Spencers Retail and Gujarat Alkalies go up and down completely randomly.

Pair Corralation between Spencers Retail and Gujarat Alkalies

Assuming the 90 days trading horizon Spencers Retail Limited is expected to generate 1.53 times more return on investment than Gujarat Alkalies. However, Spencers Retail is 1.53 times more volatile than Gujarat Alkalies and. It trades about -0.07 of its potential returns per unit of risk. Gujarat Alkalies and is currently generating about -0.14 per unit of risk. If you would invest  8,040  in Spencers Retail Limited on December 29, 2024 and sell it today you would lose (1,623) from holding Spencers Retail Limited or give up 20.19% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  Gujarat Alkalies and

Spencers Retail

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Gujarat Alkalies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Spencers Retail and Gujarat Alkalies

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

The idea behind Spencers Retail Limited and Gujarat Alkalies and 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.