Correlation Between Waaree Energies and Selan Exploration

Can any of the company-specific risk be diversified away by investing in both Waaree Energies and Selan Exploration 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 Waaree Energies and Selan Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waaree Energies Limited and Selan Exploration Technology, you can compare the effects of market volatilities on Waaree Energies and Selan Exploration 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 Waaree Energies with a short position of Selan Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waaree Energies and Selan Exploration.

Diversification Opportunities for Waaree Energies and Selan Exploration

0.9

Correlation Coefficient

Waaree Energies  Selan Exploration

Almost no diversification

The 3 months correlation between Waaree and Selan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Waaree Energies Limited and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration and Waaree Energies 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 Waaree Energies Limited are associated (or correlated) with Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of Waaree Energies i.e., Waaree Energies and Selan Exploration go up and down completely randomly.

Pair Corralation between Waaree Energies and Selan Exploration

Assuming the 90 days trading horizon Waaree Energies Limited is expected to generate 0.71 times more return on investment than Selan Exploration. However, Waaree Energies Limited is 1.42 times less risky than Selan Exploration. It trades about -0.06 of its potential returns per unit of risk. Selan Exploration Technology is currently generating about -0.1 per unit of risk. If you would invest  282,315  in Waaree Energies Limited on December 26, 2024 and sell it today you would lose (38,220) from holding Waaree Energies Limited or give up 13.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Waaree Energies Limited  vs.  Selan Exploration Technology

Waaree Energies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waaree Energies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Selan Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Waaree Energies and Selan Exploration

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

The idea behind Waaree Energies Limited and Selan Exploration Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.