Correlation Between India Glycols and Indo Borax

Can any of the company-specific risk be diversified away by investing in both India Glycols and Indo Borax 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 India Glycols and Indo Borax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between India Glycols Limited and Indo Borax Chemicals, you can compare the effects of market volatilities on India Glycols and Indo Borax 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 India Glycols with a short position of Indo Borax. Check out your portfolio center. Please also check ongoing floating volatility patterns of India Glycols and Indo Borax.

Diversification Opportunities for India Glycols and Indo Borax

0.45

Correlation Coefficient

India Glycols  Indo Borax

Very weak diversification

The 3 months correlation between India and Indo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals and India Glycols 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 India Glycols Limited are associated (or correlated) with Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of India Glycols i.e., India Glycols and Indo Borax go up and down completely randomly.

Pair Corralation between India Glycols and Indo Borax

Assuming the 90 days trading horizon India Glycols Limited is expected to under-perform the Indo Borax. But the stock apears to be less risky and, when comparing its historical volatility, India Glycols Limited is 2.09 times less risky than Indo Borax. The stock trades about -0.24 of its potential returns per unit of risk. The Indo Borax Chemicals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  21,483  in Indo Borax Chemicals on July 2, 2024 and sell it today you would earn a total of  156.00  from holding Indo Borax Chemicals or generate 0.73% return on investment over 90 days.

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

India Glycols Limited  vs.  Indo Borax Chemicals

India Glycols Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, India Glycols disclosed solid returns over the last few months and may actually be approaching a breakup point.

Indo Borax Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Borax Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Indo Borax may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with India Glycols and Indo Borax

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

The idea behind India Glycols Limited and Indo Borax Chemicals 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.