Correlation Between India Glycols and Sudarshan Chemical

Can any of the company-specific risk be diversified away by investing in both India Glycols and Sudarshan Chemical 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 India Glycols and Sudarshan Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between India Glycols Limited and Sudarshan Chemical Industries, you can compare the effects of market volatilities on India Glycols and Sudarshan Chemical 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 India Glycols with a short position of Sudarshan Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of India Glycols and Sudarshan Chemical.

Diversification Opportunities for India Glycols and Sudarshan Chemical

0.62

Correlation Coefficient

India Glycols  Sudarshan Chemical

Poor diversification

The 3 months correlation between India and Sudarshan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and Sudarshan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sudarshan Chemical and India Glycols 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 India Glycols Limited are associated (or correlated) with Sudarshan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sudarshan Chemical has no effect on the direction of India Glycols i.e., India Glycols and Sudarshan Chemical go up and down completely randomly.

Pair Corralation between India Glycols and Sudarshan Chemical

Assuming the 90 days trading horizon India Glycols Limited is expected to under-perform the Sudarshan Chemical. But the stock apears to be less risky and, when comparing its historical volatility, India Glycols Limited is 1.12 times less risky than Sudarshan Chemical. The stock trades about -0.01 of its potential returns per unit of risk. The Sudarshan Chemical Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  102,555  in Sudarshan Chemical Industries on September 1, 2024 and sell it today you would earn a total of  4,040  from holding Sudarshan Chemical Industries or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

India Glycols Limited  vs.  Sudarshan Chemical Industries

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, India Glycols is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Sudarshan Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Sudarshan Chemical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with India Glycols and Sudarshan Chemical

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

The idea behind India Glycols Limited and Sudarshan Chemical Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.