Correlation Between Spentex Industries and Elgi Rubber

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

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

Diversification Opportunities for Spentex Industries and Elgi Rubber

0.0

Correlation Coefficient

Spentex Industries  Elgi Rubber

Pay attention - limited upside

The 3 months correlation between Spentex and Elgi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Spentex Industries Limited and Elgi Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elgi Rubber and Spentex Industries 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 Spentex Industries Limited 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 Spentex Industries i.e., Spentex Industries and Elgi Rubber go up and down completely randomly.

Pair Corralation between Spentex Industries and Elgi Rubber

If you would invest  11,118  in Elgi Rubber on September 4, 2024 and sell it today you would earn a total of  44.00  from holding Elgi Rubber or generate 0.4% return on investment over 90 days.

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

Spentex Industries Limited  vs.  Elgi Rubber

Spentex Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spentex Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Spentex Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elgi Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Elgi Rubber is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spentex Industries and Elgi Rubber

The main advantage of trading using opposite Spentex Industries and Elgi Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spentex Industries 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 Spentex Industries Limited 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.