Correlation Between Welspun Investments and Golden Tobacco

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

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

Diversification Opportunities for Welspun Investments and Golden Tobacco

0.5

Correlation Coefficient

Welspun Investments  Golden Tobacco

Very weak diversification

The 3 months correlation between Welspun and Golden is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Welspun Investments and and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and Welspun Investments 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 Welspun Investments and 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 Welspun Investments i.e., Welspun Investments and Golden Tobacco go up and down completely randomly.

Pair Corralation between Welspun Investments and Golden Tobacco

Assuming the 90 days trading horizon Welspun Investments and is expected to under-perform the Golden Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Welspun Investments and is 1.38 times less risky than Golden Tobacco. The stock trades about -0.04 of its potential returns per unit of risk. The Golden Tobacco Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,966  in Golden Tobacco Limited on September 19, 2024 and sell it today you would earn a total of  233.00  from holding Golden Tobacco Limited or generate 5.87% return on investment over 90 days.

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

Welspun Investments and  vs.  Golden Tobacco Limited

Welspun Investments and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welspun Investments and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Welspun Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Welspun Investments and Golden Tobacco

The main advantage of trading using opposite Welspun Investments and Golden Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Welspun Investments 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 Welspun Investments and 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.