Correlation Between Suzlon Energy and Azad Engineering

Can any of the company-specific risk be diversified away by investing in both Suzlon Energy and Azad Engineering 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 Suzlon Energy and Azad Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Suzlon Energy and Azad Engineering

-0.26

Correlation Coefficient

Suzlon Energy  Azad Engineering

Very good diversification

The 3 months correlation between Suzlon and Azad is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Suzlon Energy Limited and Azad Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azad Engineering and Suzlon Energy 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 Suzlon Energy Limited are associated (or correlated) with Azad Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azad Engineering has no effect on the direction of Suzlon Energy i.e., Suzlon Energy and Azad Engineering go up and down completely randomly.

Pair Corralation between Suzlon Energy and Azad Engineering

Assuming the 90 days trading horizon Suzlon Energy Limited is expected to generate 0.99 times more return on investment than Azad Engineering. However, Suzlon Energy Limited is 1.01 times less risky than Azad Engineering. It trades about 0.13 of its potential returns per unit of risk. Azad Engineering Limited is currently generating about 0.13 per unit of risk. If you would invest  980.00  in Suzlon Energy Limited on October 22, 2024 and sell it today you would earn a total of  4,829  from holding Suzlon Energy Limited or generate 492.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.27%
Values	Daily Returns

Suzlon Energy Limited  vs.  Azad Engineering Limited

Suzlon Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzlon Energy Limited 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 essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Azad Engineering

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azad Engineering Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Azad Engineering unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzlon Energy and Azad Engineering

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

The idea behind Suzlon Energy Limited and Azad Engineering 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 Stocks Directory module to find actively traded stocks across global markets.