Correlation Between Gujarat Fluorochemicals and Britannia Industries

Can any of the company-specific risk be diversified away by investing in both Gujarat Fluorochemicals and Britannia Industries 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 Gujarat Fluorochemicals and Britannia Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Gujarat Fluorochemicals and Britannia Industries

0.49

Correlation Coefficient

Gujarat Fluorochemicals  Britannia Industries

Very weak diversification

The 3 months correlation between Gujarat and Britannia is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Britannia Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Britannia Industries and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited are associated (or correlated) with Britannia Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Britannia Industries has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Britannia Industries go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Britannia Industries

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 1.5 times more return on investment than Britannia Industries. However, Gujarat Fluorochemicals is 1.5 times more volatile than Britannia Industries Limited. It trades about 0.04 of its potential returns per unit of risk. Britannia Industries Limited is currently generating about -0.24 per unit of risk. If you would invest  429,336  in Gujarat Fluorochemicals Limited on September 12, 2024 and sell it today you would earn a total of  16,104  from holding Gujarat Fluorochemicals Limited or generate 3.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Gujarat Fluorochemicals Limite  vs.  Britannia Industries Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Britannia Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Britannia Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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 Gujarat Fluorochemicals and Britannia Industries

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

The idea behind Gujarat Fluorochemicals Limited and Britannia Industries 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.