Correlation Between Sitara Chemical and Grays Leasing

Can any of the company-specific risk be diversified away by investing in both Sitara Chemical and Grays Leasing 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 Sitara Chemical and Grays Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sitara Chemical Industries and Grays Leasing, you can compare the effects of market volatilities on Sitara Chemical and Grays Leasing 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 Sitara Chemical with a short position of Grays Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitara Chemical and Grays Leasing.

Diversification Opportunities for Sitara Chemical and Grays Leasing

-0.27

Correlation Coefficient

Sitara Chemical  Grays Leasing

Very good diversification

The 3 months correlation between Sitara and Grays is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sitara Chemical Industries and Grays Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grays Leasing and Sitara Chemical 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 Sitara Chemical Industries are associated (or correlated) with Grays Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grays Leasing has no effect on the direction of Sitara Chemical i.e., Sitara Chemical and Grays Leasing go up and down completely randomly.

Pair Corralation between Sitara Chemical and Grays Leasing

Assuming the 90 days trading horizon Sitara Chemical Industries is expected to generate 0.71 times more return on investment than Grays Leasing. However, Sitara Chemical Industries is 1.41 times less risky than Grays Leasing. It trades about 0.04 of its potential returns per unit of risk. Grays Leasing is currently generating about -0.04 per unit of risk. If you would invest  28,027  in Sitara Chemical Industries on August 30, 2024 and sell it today you would earn a total of  1,227  from holding Sitara Chemical Industries or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Sitara Chemical Industries  vs.  Grays Leasing

Sitara Chemical Indu

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sitara Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grays Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grays Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sitara Chemical and Grays Leasing

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

The idea behind Sitara Chemical Industries and Grays Leasing 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.