Correlation Between NIFTY SUMER and Banka BioLoo

Can any of the company-specific risk be diversified away by investing in both NIFTY SUMER and Banka BioLoo 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 NIFTY SUMER and Banka BioLoo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIFTY SUMER DURABLES and Banka BioLoo Limited, you can compare the effects of market volatilities on NIFTY SUMER and Banka BioLoo 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 NIFTY SUMER with a short position of Banka BioLoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Banka BioLoo.

Diversification Opportunities for NIFTY SUMER and Banka BioLoo

0.05

Correlation Coefficient

NIFTY SUMER  Banka BioLoo

Significant diversification

The 3 months correlation between NIFTY and Banka is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Banka BioLoo Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banka BioLoo Limited and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Banka BioLoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banka BioLoo Limited has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Banka BioLoo go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Banka BioLoo

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.44 times more return on investment than Banka BioLoo. However, NIFTY SUMER DURABLES is 2.28 times less risky than Banka BioLoo. It trades about 0.2 of its potential returns per unit of risk. Banka BioLoo Limited is currently generating about -0.02 per unit of risk. If you would invest  3,977,520  in NIFTY SUMER DURABLES on September 23, 2024 and sell it today you would earn a total of  152,945  from holding NIFTY SUMER DURABLES or generate 3.85% return on investment over 90 days.

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

NIFTY SUMER DURABLES  vs.  Banka BioLoo Limited

Pair Trading with NIFTY SUMER and Banka BioLoo

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

The idea behind NIFTY SUMER DURABLES and Banka BioLoo 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.

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