Correlation Between Genus Power and Indian Railway

Can any of the company-specific risk be diversified away by investing in both Genus Power and Indian Railway 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 Genus Power and Indian Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genus Power Infrastructures and Indian Railway Finance, you can compare the effects of market volatilities on Genus Power and Indian Railway 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 Genus Power with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genus Power and Indian Railway.

Diversification Opportunities for Genus Power and Indian Railway

0.36

Correlation Coefficient

Genus Power  Indian Railway

Weak diversification

The 3 months correlation between Genus and Indian is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Genus Power Infrastructures and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and Genus Power 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 Genus Power Infrastructures are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of Genus Power i.e., Genus Power and Indian Railway go up and down completely randomly.

Pair Corralation between Genus Power and Indian Railway

Assuming the 90 days trading horizon Genus Power Infrastructures is expected to generate 1.0 times more return on investment than Indian Railway. However, Genus Power is 1.0 times more volatile than Indian Railway Finance. It trades about 0.08 of its potential returns per unit of risk. Indian Railway Finance is currently generating about -0.1 per unit of risk. If you would invest  41,630  in Genus Power Infrastructures on September 4, 2024 and sell it today you would earn a total of  4,265  from holding Genus Power Infrastructures or generate 10.25% return on investment over 90 days.

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

Genus Power Infrastructures  vs.  Indian Railway Finance

Genus Power Infrastr

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genus Power Infrastructures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Genus Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indian Railway Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Railway Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Genus Power and Indian Railway

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

The idea behind Genus Power Infrastructures and Indian Railway Finance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.