Correlation Between Garuda Construction and Shivalik Bimetal

Can any of the company-specific risk be diversified away by investing in both Garuda Construction and Shivalik Bimetal 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 Garuda Construction and Shivalik Bimetal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garuda Construction Engineering and Shivalik Bimetal Controls, you can compare the effects of market volatilities on Garuda Construction and Shivalik Bimetal 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 Garuda Construction with a short position of Shivalik Bimetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and Shivalik Bimetal.

Diversification Opportunities for Garuda Construction and Shivalik Bimetal

0.31

Correlation Coefficient

Garuda Construction  Shivalik Bimetal

Weak diversification

The 3 months correlation between Garuda and Shivalik is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Shivalik Bimetal Controls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shivalik Bimetal Controls and Garuda Construction 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 Garuda Construction Engineering are associated (or correlated) with Shivalik Bimetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shivalik Bimetal Controls has no effect on the direction of Garuda Construction i.e., Garuda Construction and Shivalik Bimetal go up and down completely randomly.

Pair Corralation between Garuda Construction and Shivalik Bimetal

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.86 times more return on investment than Shivalik Bimetal. However, Garuda Construction is 1.86 times more volatile than Shivalik Bimetal Controls. It trades about 0.07 of its potential returns per unit of risk. Shivalik Bimetal Controls is currently generating about 0.01 per unit of risk. If you would invest  10,636  in Garuda Construction Engineering on September 23, 2024 and sell it today you would earn a total of  1,191  from holding Garuda Construction Engineering or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.56%
Values	Daily Returns

Garuda Construction Engineerin  vs.  Shivalik Bimetal Controls

Garuda Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Shivalik Bimetal Controls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shivalik Bimetal Controls has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Shivalik Bimetal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Garuda Construction and Shivalik Bimetal

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

The idea behind Garuda Construction Engineering and Shivalik Bimetal Controls 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.