Correlation Between Ittehad Chemicals and Amreli Steels

Can any of the company-specific risk be diversified away by investing in both Ittehad Chemicals and Amreli Steels 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 Ittehad Chemicals and Amreli Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ittehad Chemicals and Amreli Steels, you can compare the effects of market volatilities on Ittehad Chemicals and Amreli Steels 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 Ittehad Chemicals with a short position of Amreli Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ittehad Chemicals and Amreli Steels.

Diversification Opportunities for Ittehad Chemicals and Amreli Steels

0.48

Correlation Coefficient

Ittehad Chemicals  Amreli Steels

Very weak diversification

The 3 months correlation between Ittehad and Amreli is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals and Amreli Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amreli Steels and Ittehad Chemicals 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 Ittehad Chemicals are associated (or correlated) with Amreli Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amreli Steels has no effect on the direction of Ittehad Chemicals i.e., Ittehad Chemicals and Amreli Steels go up and down completely randomly.

Pair Corralation between Ittehad Chemicals and Amreli Steels

Assuming the 90 days trading horizon Ittehad Chemicals is expected to generate 0.88 times more return on investment than Amreli Steels. However, Ittehad Chemicals is 1.13 times less risky than Amreli Steels. It trades about 0.2 of its potential returns per unit of risk. Amreli Steels is currently generating about -0.03 per unit of risk. If you would invest  4,751  in Ittehad Chemicals on September 12, 2024 and sell it today you would earn a total of  2,061  from holding Ittehad Chemicals or generate 43.38% return on investment over 90 days.

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

Ittehad Chemicals  vs.  Amreli Steels

Ittehad Chemicals

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ittehad Chemicals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ittehad Chemicals reported solid returns over the last few months and may actually be approaching a breakup point.

Amreli Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amreli Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amreli Steels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ittehad Chemicals and Amreli Steels

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

The idea behind Ittehad Chemicals and Amreli Steels 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.