Correlation Between Shivalik Bimetal and Tarapur Transformers

Can any of the company-specific risk be diversified away by investing in both Shivalik Bimetal and Tarapur Transformers 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 Shivalik Bimetal and Tarapur Transformers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shivalik Bimetal Controls and Tarapur Transformers Limited, you can compare the effects of market volatilities on Shivalik Bimetal and Tarapur Transformers 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 Shivalik Bimetal with a short position of Tarapur Transformers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shivalik Bimetal and Tarapur Transformers.

Diversification Opportunities for Shivalik Bimetal and Tarapur Transformers

-0.32

Correlation Coefficient

Shivalik Bimetal  Tarapur Transformers

Very good diversification

The 3 months correlation between Shivalik and Tarapur is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shivalik Bimetal Controls and Tarapur Transformers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarapur Transformers and Shivalik Bimetal 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 Shivalik Bimetal Controls are associated (or correlated) with Tarapur Transformers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarapur Transformers has no effect on the direction of Shivalik Bimetal i.e., Shivalik Bimetal and Tarapur Transformers go up and down completely randomly.

Pair Corralation between Shivalik Bimetal and Tarapur Transformers

Assuming the 90 days trading horizon Shivalik Bimetal is expected to generate 51.07 times less return on investment than Tarapur Transformers. But when comparing it to its historical volatility, Shivalik Bimetal Controls is 1.09 times less risky than Tarapur Transformers. It trades about 0.01 of its potential returns per unit of risk. Tarapur Transformers Limited is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  2,210  in Tarapur Transformers Limited on September 23, 2024 and sell it today you would earn a total of  2,339  from holding Tarapur Transformers Limited or generate 105.84% return on investment over 90 days.

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

Shivalik Bimetal Controls  vs.  Tarapur Transformers Limited

Shivalik Bimetal Controls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shivalik Bimetal Controls has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Shivalik Bimetal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tarapur Transformers

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tarapur Transformers Limited are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shivalik Bimetal and Tarapur Transformers

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

The idea behind Shivalik Bimetal Controls and Tarapur Transformers 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.