Correlation Between Indian Metals and Aarti Drugs

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Aarti Drugs 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 Indian Metals and Aarti Drugs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and Aarti Drugs Limited, you can compare the effects of market volatilities on Indian Metals and Aarti Drugs 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 Indian Metals with a short position of Aarti Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Aarti Drugs.

Diversification Opportunities for Indian Metals and Aarti Drugs

-0.83

Correlation Coefficient

Indian Metals  Aarti Drugs

Pay attention - limited upside

The 3 months correlation between Indian and Aarti is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Indian Metals i.e., Indian Metals and Aarti Drugs go up and down completely randomly.

Pair Corralation between Indian Metals and Aarti Drugs

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 0.91 times more return on investment than Aarti Drugs. However, Indian Metals Ferro is 1.1 times less risky than Aarti Drugs. It trades about 0.13 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about 0.09 per unit of risk. If you would invest  81,605  in Indian Metals Ferro on September 26, 2024 and sell it today you would earn a total of  5,500  from holding Indian Metals Ferro or generate 6.74% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Aarti Drugs Limited

Indian Metals Ferro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting 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 Indian Metals and Aarti Drugs

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

The idea behind Indian Metals Ferro and Aarti Drugs 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.