Correlation Between Indian Metals and Bhagiradha Chemicals

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Bhagiradha Chemicals 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 Indian Metals and Bhagiradha Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and Bhagiradha Chemicals Industries, you can compare the effects of market volatilities on Indian Metals and Bhagiradha Chemicals 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 Indian Metals with a short position of Bhagiradha Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Bhagiradha Chemicals.

Diversification Opportunities for Indian Metals and Bhagiradha Chemicals

-0.34

Correlation Coefficient

Indian Metals  Bhagiradha Chemicals

Very good diversification

The 3 months correlation between Indian and Bhagiradha is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Bhagiradha Chemicals Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bhagiradha Chemicals and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with Bhagiradha Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bhagiradha Chemicals has no effect on the direction of Indian Metals i.e., Indian Metals and Bhagiradha Chemicals go up and down completely randomly.

Pair Corralation between Indian Metals and Bhagiradha Chemicals

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.68 times more return on investment than Bhagiradha Chemicals. However, Indian Metals is 1.68 times more volatile than Bhagiradha Chemicals Industries. It trades about 0.02 of its potential returns per unit of risk. Bhagiradha Chemicals Industries is currently generating about -0.42 per unit of risk. If you would invest  84,215  in Indian Metals Ferro on September 30, 2024 and sell it today you would earn a total of  330.00  from holding Indian Metals Ferro or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Indian Metals Ferro  vs.  Bhagiradha Chemicals Industrie

Indian Metals Ferro

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bhagiradha Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Indian Metals and Bhagiradha Chemicals

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

The idea behind Indian Metals Ferro and Bhagiradha Chemicals Industries 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.