Correlation Between Edelweiss Financial and Akums Drugs

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

By analyzing existing cross correlation between Edelweiss Financial Services and Akums Drugs and, you can compare the effects of market volatilities on Edelweiss Financial and Akums Drugs 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 Edelweiss Financial with a short position of Akums Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edelweiss Financial and Akums Drugs.

Diversification Opportunities for Edelweiss Financial and Akums Drugs

0.2

Correlation Coefficient

Edelweiss Financial  Akums Drugs

Modest diversification

The 3 months correlation between Edelweiss and Akums is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Edelweiss Financial Services and Akums Drugs and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akums Drugs and Edelweiss Financial 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 Edelweiss Financial Services are associated (or correlated) with Akums Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akums Drugs has no effect on the direction of Edelweiss Financial i.e., Edelweiss Financial and Akums Drugs go up and down completely randomly.

Pair Corralation between Edelweiss Financial and Akums Drugs

Assuming the 90 days trading horizon Edelweiss Financial Services is expected to generate 0.97 times more return on investment than Akums Drugs. However, Edelweiss Financial Services is 1.03 times less risky than Akums Drugs. It trades about 0.09 of its potential returns per unit of risk. Akums Drugs and is currently generating about -0.06 per unit of risk. If you would invest  4,950  in Edelweiss Financial Services on September 9, 2024 and sell it today you would earn a total of  7,974  from holding Edelweiss Financial Services or generate 161.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.84%
Values	Daily Returns

Edelweiss Financial Services  vs.  Akums Drugs and

Edelweiss Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edelweiss Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Edelweiss Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Akums Drugs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akums Drugs and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Edelweiss Financial and Akums Drugs

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

The idea behind Edelweiss Financial Services and Akums Drugs 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.