Correlation Between Aarti Drugs and Shaily Engineering

Can any of the company-specific risk be diversified away by investing in both Aarti Drugs and Shaily Engineering 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 Aarti Drugs and Shaily Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aarti Drugs Limited and Shaily Engineering Plastics, you can compare the effects of market volatilities on Aarti Drugs and Shaily Engineering 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 Aarti Drugs with a short position of Shaily Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarti Drugs and Shaily Engineering.

Diversification Opportunities for Aarti Drugs and Shaily Engineering

-0.46

Correlation Coefficient

Aarti Drugs  Shaily Engineering

Very good diversification

The 3 months correlation between Aarti and Shaily is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aarti Drugs Limited and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering and Aarti Drugs 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 Aarti Drugs Limited are associated (or correlated) with Shaily Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaily Engineering has no effect on the direction of Aarti Drugs i.e., Aarti Drugs and Shaily Engineering go up and down completely randomly.

Pair Corralation between Aarti Drugs and Shaily Engineering

Assuming the 90 days trading horizon Aarti Drugs Limited is expected to under-perform the Shaily Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Aarti Drugs Limited is 4.29 times less risky than Shaily Engineering. The stock trades about -0.26 of its potential returns per unit of risk. The Shaily Engineering Plastics is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  93,400  in Shaily Engineering Plastics on September 5, 2024 and sell it today you would earn a total of  38,150  from holding Shaily Engineering Plastics or generate 40.85% return on investment over 90 days.

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

Aarti Drugs Limited  vs.  Shaily Engineering Plastics

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Shaily Engineering

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aarti Drugs and Shaily Engineering

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

The idea behind Aarti Drugs Limited and Shaily Engineering Plastics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.