Correlation Between Gujarat Lease and TECIL Chemicals

Can any of the company-specific risk be diversified away by investing in both Gujarat Lease and TECIL Chemicals 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 TECIL Chemicals 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 TECIL Chemicals and, you can compare the effects of market volatilities on Gujarat Lease and TECIL Chemicals 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 TECIL Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Lease and TECIL Chemicals.

Diversification Opportunities for Gujarat Lease and TECIL Chemicals

-0.12

Correlation Coefficient

Gujarat Lease  TECIL Chemicals

Good diversification

The 3 months correlation between Gujarat and TECIL is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and TECIL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECIL Chemicals 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 TECIL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECIL Chemicals has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and TECIL Chemicals go up and down completely randomly.

Pair Corralation between Gujarat Lease and TECIL Chemicals

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to generate 0.78 times more return on investment than TECIL Chemicals. However, Gujarat Lease Financing is 1.27 times less risky than TECIL Chemicals. It trades about 0.03 of its potential returns per unit of risk. TECIL Chemicals and is currently generating about -0.02 per unit of risk. If you would invest  831.00  in Gujarat Lease Financing on September 2, 2024 and sell it today you would earn a total of  25.00  from holding Gujarat Lease Financing or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Gujarat Lease Financing  vs.  TECIL Chemicals and

Gujarat Lease Financing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gujarat Lease is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

TECIL Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TECIL Chemicals and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, TECIL Chemicals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gujarat Lease and TECIL Chemicals

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

The idea behind Gujarat Lease Financing and TECIL Chemicals and 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.