Correlation Between Gujarat Narmada and APL Apollo

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

By analyzing existing cross correlation between Gujarat Narmada Valley and APL Apollo Tubes, you can compare the effects of market volatilities on Gujarat Narmada and APL Apollo 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 Narmada with a short position of APL Apollo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Narmada and APL Apollo.

Diversification Opportunities for Gujarat Narmada and APL Apollo

0.04

Correlation Coefficient

Gujarat Narmada  APL Apollo

Significant diversification

The 3 months correlation between Gujarat and APL is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and APL Apollo Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APL Apollo Tubes and Gujarat Narmada 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 Narmada Valley are associated (or correlated) with APL Apollo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APL Apollo Tubes has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and APL Apollo go up and down completely randomly.

Pair Corralation between Gujarat Narmada and APL Apollo

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the APL Apollo. In addition to that, Gujarat Narmada is 1.27 times more volatile than APL Apollo Tubes. It trades about -0.04 of its total potential returns per unit of risk. APL Apollo Tubes is currently generating about 0.07 per unit of volatility. If you would invest  142,363  in APL Apollo Tubes on September 3, 2024 and sell it today you would earn a total of  9,277  from holding APL Apollo Tubes or generate 6.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Gujarat Narmada Valley  vs.  APL Apollo Tubes

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

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

APL Apollo Tubes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APL Apollo Tubes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, APL Apollo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gujarat Narmada and APL Apollo

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

The idea behind Gujarat Narmada Valley and APL Apollo Tubes 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 Global Correlations module to find global opportunities by holding instruments from different markets.