Correlation Between Gujarat Narmada and Mold Tek

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

Diversification Opportunities for Gujarat Narmada and Mold Tek

0.79

Correlation Coefficient

Gujarat Narmada  Mold Tek

Poor diversification

The 3 months correlation between Gujarat and Mold is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Mold Tek Packaging Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mold Tek Packaging 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 Mold Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mold Tek Packaging has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Mold Tek go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Mold Tek

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to generate 1.27 times more return on investment than Mold Tek. However, Gujarat Narmada is 1.27 times more volatile than Mold Tek Packaging Limited. It trades about -0.04 of its potential returns per unit of risk. Mold Tek Packaging Limited is currently generating about -0.11 per unit of risk. If you would invest  68,055  in Gujarat Narmada Valley on September 6, 2024 and sell it today you would lose (4,530) from holding Gujarat Narmada Valley or give up 6.66% of portfolio value over 90 days.

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

Gujarat Narmada Valley  vs.  Mold Tek Packaging Limited

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.

Mold Tek Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mold Tek Packaging Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gujarat Narmada and Mold Tek

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

The idea behind Gujarat Narmada Valley and Mold Tek Packaging Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.