Correlation Between Alkali Metals and Indian Metals

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

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

Diversification Opportunities for Alkali Metals and Indian Metals

0.48

Correlation Coefficient

Alkali Metals  Indian Metals

Very weak diversification

The 3 months correlation between Alkali and Indian is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Alkali Metals i.e., Alkali Metals and Indian Metals go up and down completely randomly.

Pair Corralation between Alkali Metals and Indian Metals

Assuming the 90 days trading horizon Alkali Metals is expected to generate 1.54 times less return on investment than Indian Metals. In addition to that, Alkali Metals is 1.38 times more volatile than Indian Metals Ferro. It trades about 0.08 of its total potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.16 per unit of volatility. If you would invest  58,110  in Indian Metals Ferro on May 7, 2025 and sell it today you would earn a total of  14,015  from holding Indian Metals Ferro or generate 24.12% return on investment over 90 days.

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

Alkali Metals Limited  vs.  Indian Metals Ferro

Alkali Metals Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alkali Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Indian Metals Ferro

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and Indian Metals

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

The idea behind Alkali Metals Limited and Indian Metals Ferro 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.