Correlation Between Azure Power and System1

Can any of the company-specific risk be diversified away by investing in both Azure Power and System1 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 Azure Power and System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Azure Power Global and System1, you can compare the effects of market volatilities on Azure Power and System1 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 Azure Power with a short position of System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azure Power and System1.

Diversification Opportunities for Azure Power and System1

-0.19

Correlation Coefficient

Azure Power  System1

Good diversification

The 3 months correlation between Azure and System1 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Azure Power Global and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 and Azure Power 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 Azure Power Global are associated (or correlated) with System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of Azure Power i.e., Azure Power and System1 go up and down completely randomly.

Pair Corralation between Azure Power and System1

Assuming the 90 days horizon Azure Power Global is expected to generate 3.0 times more return on investment than System1. However, Azure Power is 3.0 times more volatile than System1. It trades about 0.09 of its potential returns per unit of risk. System1 is currently generating about 0.08 per unit of risk. If you would invest  90.00  in Azure Power Global on May 14, 2025 and sell it today you would lose (75.00) from holding Azure Power Global or give up 83.33% of portfolio value over 90 days.

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

Azure Power Global  vs.  System1

Azure Power Global

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Power Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Azure Power reported solid returns over the last few months and may actually be approaching a breakup point.

System1

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in System1 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, System1 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azure Power and System1

The main advantage of trading using opposite Azure Power and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azure Power position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.

The idea behind Azure Power Global and System1 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.