Correlation Between Suzlon Energy and Paramount Communications

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

Diversification Opportunities for Suzlon Energy and Paramount Communications

0.51

Correlation Coefficient

Suzlon Energy  Paramount Communications

Very weak diversification

The 3 months correlation between Suzlon and Paramount is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Suzlon Energy Limited and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications 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 Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Suzlon Energy i.e., Suzlon Energy and Paramount Communications go up and down completely randomly.

Pair Corralation between Suzlon Energy and Paramount Communications

Assuming the 90 days trading horizon Suzlon Energy Limited is expected to generate 0.99 times more return on investment than Paramount Communications. However, Suzlon Energy Limited is 1.01 times less risky than Paramount Communications. It trades about 0.13 of its potential returns per unit of risk. Paramount Communications Limited is currently generating about 0.07 per unit of risk. If you would invest  1,005  in Suzlon Energy Limited on October 4, 2024 and sell it today you would earn a total of  5,217  from holding Suzlon Energy Limited or generate 519.1% return on investment over 90 days.

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

Suzlon Energy Limited  vs.  Paramount Communications Limit

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 unfluctuating 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.

Paramount Communications

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Communications Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Paramount Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Suzlon Energy and Paramount Communications

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

The idea behind Suzlon Energy Limited and Paramount Communications 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.