Correlation Between Elgi Rubber and Motilal Oswal

Can any of the company-specific risk be diversified away by investing in both Elgi Rubber and Motilal Oswal 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 Elgi Rubber and Motilal Oswal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Elgi Rubber and Motilal Oswal

0.24

Correlation Coefficient

Elgi Rubber  Motilal Oswal

Modest diversification

The 3 months correlation between Elgi and Motilal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Elgi Rubber and Motilal Oswal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motilal Oswal Financial and Elgi Rubber 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 Elgi Rubber are associated (or correlated) with Motilal Oswal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motilal Oswal Financial has no effect on the direction of Elgi Rubber i.e., Elgi Rubber and Motilal Oswal go up and down completely randomly.

Pair Corralation between Elgi Rubber and Motilal Oswal

Assuming the 90 days trading horizon Elgi Rubber is expected to generate 2.14 times more return on investment than Motilal Oswal. However, Elgi Rubber is 2.14 times more volatile than Motilal Oswal Financial. It trades about 0.04 of its potential returns per unit of risk. Motilal Oswal Financial is currently generating about -0.05 per unit of risk. If you would invest  11,052  in Elgi Rubber on September 3, 2024 and sell it today you would earn a total of  195.00  from holding Elgi Rubber or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Elgi Rubber  vs.  Motilal Oswal Financial

Elgi Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Elgi Rubber may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Motilal Oswal Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motilal Oswal Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Motilal Oswal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elgi Rubber and Motilal Oswal

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

The idea behind Elgi Rubber and Motilal Oswal Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.