Correlation Between Bodal Chemicals and Fine Organic

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

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

Diversification Opportunities for Bodal Chemicals and Fine Organic

0.59

Correlation Coefficient

Bodal Chemicals  Fine Organic

Very weak diversification

The 3 months correlation between Bodal and Fine is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bodal Chemicals Limited and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries and Bodal Chemicals 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 Bodal Chemicals Limited are associated (or correlated) with Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of Bodal Chemicals i.e., Bodal Chemicals and Fine Organic go up and down completely randomly.

Pair Corralation between Bodal Chemicals and Fine Organic

Assuming the 90 days trading horizon Bodal Chemicals Limited is expected to under-perform the Fine Organic. But the stock apears to be less risky and, when comparing its historical volatility, Bodal Chemicals Limited is 1.13 times less risky than Fine Organic. The stock trades about -0.11 of its potential returns per unit of risk. The Fine Organic Industries is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  526,670  in Fine Organic Industries on September 26, 2024 and sell it today you would lose (59,320) from holding Fine Organic Industries or give up 11.26% of portfolio value over 90 days.

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

Bodal Chemicals Limited  vs.  Fine Organic Industries

Bodal Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodal Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bodal Chemicals and Fine Organic

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

The idea behind Bodal Chemicals Limited and Fine Organic 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.