Correlation Between Suzlon Energy and Diamond Power

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

Diversification Opportunities for Suzlon Energy and Diamond Power

0.91

Correlation Coefficient

Suzlon Energy  Diamond Power

Almost no diversification

The 3 months correlation between Suzlon and Diamond is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Suzlon Energy Limited and Diamond Power Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Power Infras 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 Diamond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Power Infras has no effect on the direction of Suzlon Energy i.e., Suzlon Energy and Diamond Power go up and down completely randomly.

Pair Corralation between Suzlon Energy and Diamond Power

Assuming the 90 days trading horizon Suzlon Energy Limited is expected to generate 0.69 times more return on investment than Diamond Power. However, Suzlon Energy Limited is 1.44 times less risky than Diamond Power. It trades about -0.18 of its potential returns per unit of risk. Diamond Power Infrastructure is currently generating about -0.26 per unit of risk. If you would invest  6,826  in Suzlon Energy Limited on December 5, 2024 and sell it today you would lose (1,815) from holding Suzlon Energy Limited or give up 26.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Suzlon Energy Limited  vs.  Diamond Power Infrastructure

Suzlon Energy Limited

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's essential 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.

Diamond Power Infras

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Power Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Suzlon Energy and Diamond Power

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

The idea behind Suzlon Energy Limited and Diamond Power Infrastructure 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.