Correlation Between Investment Trust and Golden Tobacco

Can any of the company-specific risk be diversified away by investing in both Investment Trust and Golden Tobacco 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 Investment Trust and Golden Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Investment Trust and Golden Tobacco Limited, you can compare the effects of market volatilities on Investment Trust and Golden Tobacco 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 Investment Trust with a short position of Golden Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Trust and Golden Tobacco.

Diversification Opportunities for Investment Trust and Golden Tobacco

-0.32

Correlation Coefficient

Investment Trust  Golden Tobacco

Very good diversification

The 3 months correlation between Investment and Golden is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and Investment Trust 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 The Investment Trust are associated (or correlated) with Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Investment Trust i.e., Investment Trust and Golden Tobacco go up and down completely randomly.

Pair Corralation between Investment Trust and Golden Tobacco

Assuming the 90 days trading horizon The Investment Trust is expected to under-perform the Golden Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, The Investment Trust is 1.31 times less risky than Golden Tobacco. The stock trades about -0.06 of its potential returns per unit of risk. The Golden Tobacco Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,937  in Golden Tobacco Limited on September 21, 2024 and sell it today you would earn a total of  118.00  from holding Golden Tobacco Limited or generate 3.0% return on investment over 90 days.

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

The Investment Trust  vs.  Golden Tobacco Limited

Investment Trust

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Investment Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Investment Trust and Golden Tobacco

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

The idea behind The Investment Trust and Golden Tobacco 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.