Correlation Between Fine Organic and Shriram Finance

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

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

Diversification Opportunities for Fine Organic and Shriram Finance

0.53

Correlation Coefficient

Fine Organic  Shriram Finance

Very weak diversification

The 3 months correlation between Fine and Shriram is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and Shriram Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shriram Finance and Fine Organic 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 Fine Organic Industries are associated (or correlated) with Shriram Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shriram Finance has no effect on the direction of Fine Organic i.e., Fine Organic and Shriram Finance go up and down completely randomly.

Pair Corralation between Fine Organic and Shriram Finance

Assuming the 90 days trading horizon Fine Organic Industries is expected to generate 1.1 times more return on investment than Shriram Finance. However, Fine Organic is 1.1 times more volatile than Shriram Finance Limited. It trades about -0.01 of its potential returns per unit of risk. Shriram Finance Limited is currently generating about -0.02 per unit of risk. If you would invest  532,505  in Fine Organic Industries on September 4, 2024 and sell it today you would lose (13,660) from holding Fine Organic Industries or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Fine Organic Industries  vs.  Shriram Finance Limited

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 nearly stable basic indicators, Fine Organic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shriram Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fine Organic and Shriram Finance

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

The idea behind Fine Organic Industries and Shriram Finance Limited 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.