Correlation Between Eros International and Clean Science

Can any of the company-specific risk be diversified away by investing in both Eros International and Clean Science 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 Eros International and Clean Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eros International Media and Clean Science and, you can compare the effects of market volatilities on Eros International and Clean Science 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 Eros International with a short position of Clean Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eros International and Clean Science.

Diversification Opportunities for Eros International and Clean Science

0.78

Correlation Coefficient

Eros International  Clean Science

Poor diversification

The 3 months correlation between Eros and Clean is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and Clean Science and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science and Eros International 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 Eros International Media are associated (or correlated) with Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science has no effect on the direction of Eros International i.e., Eros International and Clean Science go up and down completely randomly.

Pair Corralation between Eros International and Clean Science

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Clean Science. In addition to that, Eros International is 1.37 times more volatile than Clean Science and. It trades about -0.08 of its total potential returns per unit of risk. Clean Science and is currently generating about -0.03 per unit of volatility. If you would invest  153,750  in Clean Science and on September 22, 2024 and sell it today you would lose (8,645) from holding Clean Science and or give up 5.62% of portfolio value over 90 days.

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

Eros International Media  vs.  Clean Science and

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Clean Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Clean Science is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eros International and Clean Science

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

The idea behind Eros International Media and Clean Science 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.