Correlation Between Centum Electronics and Tainwala Chemical

Can any of the company-specific risk be diversified away by investing in both Centum Electronics and Tainwala Chemical 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 Centum Electronics and Tainwala Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Centum Electronics and Tainwala Chemical

0.17

Correlation Coefficient

Centum Electronics  Tainwala Chemical

Average diversification

The 3 months correlation between Centum and Tainwala is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Centum Electronics Limited and Tainwala Chemical and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainwala Chemical and Centum Electronics 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 Centum Electronics Limited are associated (or correlated) with Tainwala Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainwala Chemical has no effect on the direction of Centum Electronics i.e., Centum Electronics and Tainwala Chemical go up and down completely randomly.

Pair Corralation between Centum Electronics and Tainwala Chemical

Assuming the 90 days trading horizon Centum Electronics Limited is expected to under-perform the Tainwala Chemical. In addition to that, Centum Electronics is 1.12 times more volatile than Tainwala Chemical and. It trades about -0.04 of its total potential returns per unit of risk. Tainwala Chemical and is currently generating about 0.16 per unit of volatility. If you would invest  13,325  in Tainwala Chemical and on February 28, 2024 and sell it today you would earn a total of  4,610  from holding Tainwala Chemical and or generate 34.6% return on investment over 90 days.

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

Centum Electronics Limited  vs.  Tainwala Chemical and

Centum Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centum Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tainwala Chemical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tainwala Chemical and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Tainwala Chemical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centum Electronics and Tainwala Chemical

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

The idea behind Centum Electronics Limited and Tainwala Chemical and 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 Transaction History module to view history of all your transactions and understand their impact on performance.