Correlation Between Southern Petrochemicals and Iris Clothings

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

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

Diversification Opportunities for Southern Petrochemicals and Iris Clothings

0.88

Correlation Coefficient

Southern Petrochemicals  Iris Clothings

Very poor diversification

The 3 months correlation between Southern and Iris is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Southern Petrochemicals Indust and Iris Clothings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Clothings and Southern Petrochemicals 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 Southern Petrochemicals Industries are associated (or correlated) with Iris Clothings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Clothings has no effect on the direction of Southern Petrochemicals i.e., Southern Petrochemicals and Iris Clothings go up and down completely randomly.

Pair Corralation between Southern Petrochemicals and Iris Clothings

Assuming the 90 days trading horizon Southern Petrochemicals Industries is expected to generate 0.94 times more return on investment than Iris Clothings. However, Southern Petrochemicals Industries is 1.06 times less risky than Iris Clothings. It trades about 0.03 of its potential returns per unit of risk. Iris Clothings Limited is currently generating about -0.01 per unit of risk. If you would invest  7,345  in Southern Petrochemicals Industries on September 24, 2024 and sell it today you would earn a total of  63.00  from holding Southern Petrochemicals Industries or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Southern Petrochemicals Indust  vs.  Iris Clothings Limited

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries 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.

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Clothings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak 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.

Pair Trading with Southern Petrochemicals and Iris Clothings

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

The idea behind Southern Petrochemicals Industries and Iris Clothings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.