Correlation Between Gujarat Lease and PVR INOX

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

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

Diversification Opportunities for Gujarat Lease and PVR INOX

-0.06

Correlation Coefficient

Gujarat Lease  PVR INOX

Good diversification

The 3 months correlation between Gujarat and PVR is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and PVR INOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVR INOX and Gujarat Lease 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 Lease Financing are associated (or correlated) with PVR INOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVR INOX has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and PVR INOX go up and down completely randomly.

Pair Corralation between Gujarat Lease and PVR INOX

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to generate 1.34 times more return on investment than PVR INOX. However, Gujarat Lease is 1.34 times more volatile than PVR INOX. It trades about 0.14 of its potential returns per unit of risk. PVR INOX is currently generating about 0.02 per unit of risk. If you would invest  781.00  in Gujarat Lease Financing on September 5, 2024 and sell it today you would earn a total of  160.00  from holding Gujarat Lease Financing or generate 20.49% return on investment over 90 days.

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

Gujarat Lease Financing  vs.  PVR INOX

Gujarat Lease Financing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease unveiled solid returns over the last few months and may actually be approaching a breakup point.

PVR INOX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PVR INOX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, PVR INOX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gujarat Lease and PVR INOX

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

The idea behind Gujarat Lease Financing and PVR INOX 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 Stocks Directory module to find actively traded stocks across global markets.