Correlation Between Usha Martin and Fairchem Organics

Can any of the company-specific risk be diversified away by investing in both Usha Martin and Fairchem Organics 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 Usha Martin and Fairchem Organics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Usha Martin Education and Fairchem Organics Limited, you can compare the effects of market volatilities on Usha Martin and Fairchem Organics 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 Usha Martin with a short position of Fairchem Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Usha Martin and Fairchem Organics.

Diversification Opportunities for Usha Martin and Fairchem Organics

-0.26

Correlation Coefficient

Usha Martin  Fairchem Organics

Very good diversification

The 3 months correlation between Usha and Fairchem is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Usha Martin Education and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics and Usha Martin 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 Usha Martin Education are associated (or correlated) with Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Usha Martin i.e., Usha Martin and Fairchem Organics go up and down completely randomly.

Pair Corralation between Usha Martin and Fairchem Organics

Assuming the 90 days trading horizon Usha Martin is expected to generate 7.95 times less return on investment than Fairchem Organics. But when comparing it to its historical volatility, Usha Martin Education is 1.52 times less risky than Fairchem Organics. It trades about 0.01 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  110,370  in Fairchem Organics Limited on October 23, 2024 and sell it today you would earn a total of  3,375  from holding Fairchem Organics Limited or generate 3.06% return on investment over 90 days.

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

Usha Martin Education  vs.  Fairchem Organics Limited

Usha Martin Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Usha Martin Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Usha Martin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fairchem Organics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fairchem Organics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Fairchem Organics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Usha Martin and Fairchem Organics

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

The idea behind Usha Martin Education and Fairchem Organics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.