Correlation Between Suzlon Energy and Thomas Scott

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

Diversification Opportunities for Suzlon Energy and Thomas Scott

-0.22

Correlation Coefficient

Suzlon Energy  Thomas Scott

Very good diversification

The 3 months correlation between Suzlon and Thomas is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Suzlon Energy Limited and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott Limited 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 Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Suzlon Energy i.e., Suzlon Energy and Thomas Scott go up and down completely randomly.

Pair Corralation between Suzlon Energy and Thomas Scott

Assuming the 90 days trading horizon Suzlon Energy Limited is expected to under-perform the Thomas Scott. But the stock apears to be less risky and, when comparing its historical volatility, Suzlon Energy Limited is 1.29 times less risky than Thomas Scott. The stock trades about -0.06 of its potential returns per unit of risk. The Thomas Scott Limited is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  22,716  in Thomas Scott Limited on October 6, 2024 and sell it today you would earn a total of  25,274  from holding Thomas Scott Limited or generate 111.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Suzlon Energy Limited  vs.  Thomas Scott 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 latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Thomas Scott Limited

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suzlon Energy and Thomas Scott

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

The idea behind Suzlon Energy Limited and Thomas Scott 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.