Correlation Between NIFTY SUMER and Persistent Systems

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

Diversification Opportunities for NIFTY SUMER and Persistent Systems

-0.41

Correlation Coefficient

NIFTY SUMER  Persistent Systems

Very good diversification

The 3 months correlation between NIFTY and Persistent is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Persistent Systems Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persistent Systems 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 Persistent Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Persistent Systems has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Persistent Systems go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Persistent Systems

Assuming the 90 days trading horizon NIFTY SUMER is expected to generate 1.77 times less return on investment than Persistent Systems. But when comparing it to its historical volatility, NIFTY SUMER DURABLES is 2.01 times less risky than Persistent Systems. It trades about 0.14 of its potential returns per unit of risk. Persistent Systems Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  355,400  in Persistent Systems Limited on September 11, 2024 and sell it today you would earn a total of  268,025  from holding Persistent Systems Limited or generate 75.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.76%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  Persistent Systems Limited

Pair Trading with NIFTY SUMER and Persistent Systems

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

The idea behind NIFTY SUMER DURABLES and Persistent Systems 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.