Correlation Between Par Drugs and Elgi Rubber

Can any of the company-specific risk be diversified away by investing in both Par Drugs and Elgi Rubber 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 Par Drugs and Elgi Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Par Drugs And and Elgi Rubber, you can compare the effects of market volatilities on Par Drugs and Elgi Rubber 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 Par Drugs with a short position of Elgi Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Par Drugs and Elgi Rubber.

Diversification Opportunities for Par Drugs and Elgi Rubber

0.15

Correlation Coefficient

Par Drugs  Elgi Rubber

Average diversification

The 3 months correlation between Par and Elgi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Par Drugs And and Elgi Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elgi Rubber and Par Drugs 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 Par Drugs And are associated (or correlated) with Elgi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elgi Rubber has no effect on the direction of Par Drugs i.e., Par Drugs and Elgi Rubber go up and down completely randomly.

Pair Corralation between Par Drugs and Elgi Rubber

Assuming the 90 days trading horizon Par Drugs And is expected to under-perform the Elgi Rubber. In addition to that, Par Drugs is 1.27 times more volatile than Elgi Rubber. It trades about 0.0 of its total potential returns per unit of risk. Elgi Rubber is currently generating about 0.1 per unit of volatility. If you would invest  10,305  in Elgi Rubber on September 12, 2024 and sell it today you would earn a total of  2,612  from holding Elgi Rubber or generate 25.35% return on investment over 90 days.

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

Par Drugs And  vs.  Elgi Rubber

Par Drugs And

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Par Drugs And has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Par Drugs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Elgi Rubber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Elgi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Par Drugs and Elgi Rubber

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

The idea behind Par Drugs And and Elgi Rubber 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.