Correlation Between Syrma SGS and Indian Metals

Can any of the company-specific risk be diversified away by investing in both Syrma SGS and Indian Metals 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 Syrma SGS and Indian Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Syrma SGS Technology and Indian Metals Ferro, you can compare the effects of market volatilities on Syrma SGS and Indian Metals 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 Syrma SGS with a short position of Indian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Syrma SGS and Indian Metals.

Diversification Opportunities for Syrma SGS and Indian Metals

0.8

Correlation Coefficient

Syrma SGS  Indian Metals

Very poor diversification

The 3 months correlation between Syrma and Indian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Syrma SGS Technology and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Syrma SGS 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 Syrma SGS Technology are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Syrma SGS i.e., Syrma SGS and Indian Metals go up and down completely randomly.

Pair Corralation between Syrma SGS and Indian Metals

Assuming the 90 days trading horizon Syrma SGS is expected to generate 1.75 times less return on investment than Indian Metals. But when comparing it to its historical volatility, Syrma SGS Technology is 1.02 times less risky than Indian Metals. It trades about 0.11 of its potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  79,970  in Indian Metals Ferro on September 21, 2024 and sell it today you would earn a total of  9,160  from holding Indian Metals Ferro or generate 11.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Syrma SGS Technology  vs.  Indian Metals Ferro

Syrma SGS Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syrma SGS Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Syrma SGS displayed solid returns over the last few months and may actually be approaching a breakup point.

Indian Metals Ferro

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Syrma SGS and Indian Metals

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

The idea behind Syrma SGS Technology and Indian Metals Ferro 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .