Correlation Between Zuari Agro and Motilal Oswal

Can any of the company-specific risk be diversified away by investing in both Zuari Agro and Motilal Oswal 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 Zuari Agro and Motilal Oswal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zuari Agro Chemicals and Motilal Oswal Financial, you can compare the effects of market volatilities on Zuari Agro and Motilal Oswal 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 Zuari Agro with a short position of Motilal Oswal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zuari Agro and Motilal Oswal.

Diversification Opportunities for Zuari Agro and Motilal Oswal

0.43

Correlation Coefficient

Zuari Agro  Motilal Oswal

Very weak diversification

The 3 months correlation between Zuari and Motilal is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zuari Agro Chemicals and Motilal Oswal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motilal Oswal Financial and Zuari Agro 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 Zuari Agro Chemicals are associated (or correlated) with Motilal Oswal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motilal Oswal Financial has no effect on the direction of Zuari Agro i.e., Zuari Agro and Motilal Oswal go up and down completely randomly.

Pair Corralation between Zuari Agro and Motilal Oswal

Assuming the 90 days trading horizon Zuari Agro Chemicals is expected to under-perform the Motilal Oswal. In addition to that, Zuari Agro is 1.0 times more volatile than Motilal Oswal Financial. It trades about -0.31 of its total potential returns per unit of risk. Motilal Oswal Financial is currently generating about -0.2 per unit of volatility. If you would invest  101,000  in Motilal Oswal Financial on October 12, 2024 and sell it today you would lose (10,880) from holding Motilal Oswal Financial or give up 10.77% of portfolio value over 90 days.

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

Zuari Agro Chemicals  vs.  Motilal Oswal Financial

Zuari Agro Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Zuari Agro is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Motilal Oswal Financial

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Motilal Oswal Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Motilal Oswal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zuari Agro and Motilal Oswal

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

The idea behind Zuari Agro Chemicals and Motilal Oswal Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.