Correlation Between Indian Metals and Central Bank

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

Diversification Opportunities for Indian Metals and Central Bank

-0.04

Correlation Coefficient

Indian Metals  Central Bank

Good diversification

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

Pair Corralation between Indian Metals and Central Bank

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 0.99 times more return on investment than Central Bank. However, Indian Metals Ferro is 1.01 times less risky than Central Bank. It trades about 0.28 of its potential returns per unit of risk. Central Bank of is currently generating about 0.02 per unit of risk. If you would invest  63,114  in Indian Metals Ferro on September 12, 2024 and sell it today you would earn a total of  33,601  from holding Indian Metals Ferro or generate 53.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Indian Metals Ferro  vs.  Central Bank of

Indian Metals Ferro

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 21 (%) 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.

Central Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Central Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Central Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indian Metals and Central Bank

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

The idea behind Indian Metals Ferro and Central Bank of 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.