Correlation Between Iris Clothings and Southern Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Iris Clothings and Southern Petrochemicals 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 Iris Clothings and Southern Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Iris Clothings and Southern Petrochemicals

0.88

Correlation Coefficient

Iris Clothings  Southern Petrochemicals

Very poor diversification

The 3 months correlation between Iris and Southern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Iris Clothings Limited and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals and Iris Clothings 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 Iris Clothings Limited are associated (or correlated) with Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Iris Clothings i.e., Iris Clothings and Southern Petrochemicals go up and down completely randomly.

Pair Corralation between Iris Clothings and Southern Petrochemicals

Assuming the 90 days trading horizon Iris Clothings Limited is expected to under-perform the Southern Petrochemicals. In addition to that, Iris Clothings is 1.07 times more volatile than Southern Petrochemicals Industries. It trades about -0.01 of its total potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about 0.0 per unit of volatility. If you would invest  7,345  in Southern Petrochemicals Industries on September 24, 2024 and sell it today you would lose (28.00) from holding Southern Petrochemicals Industries or give up 0.38% of portfolio value over 90 days.

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

Iris Clothings Limited  vs.  Southern Petrochemicals Indust

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Clothings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Iris Clothings and Southern Petrochemicals

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

The idea behind Iris Clothings Limited and Southern Petrochemicals 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..