Correlation Between System1 and Azure Power

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

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

Diversification Opportunities for System1 and Azure Power

-0.2

Correlation Coefficient

System1  Azure Power

Good diversification

The 3 months correlation between System1 and Azure is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding System1 and Azure Power Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Power Global and System1 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 System1 are associated (or correlated) with Azure Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Power Global has no effect on the direction of System1 i.e., System1 and Azure Power go up and down completely randomly.

Pair Corralation between System1 and Azure Power

Considering the 90-day investment horizon System1 is expected to generate 1.39 times less return on investment than Azure Power. But when comparing it to its historical volatility, System1 is 1.64 times less risky than Azure Power. It trades about 0.09 of its potential returns per unit of risk. Azure Power Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Azure Power Global on May 8, 2025 and sell it today you would lose (5.00) from holding Azure Power Global or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

System1  vs.  Azure Power Global

System1

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in System1 are ranked lower than 7 (%) 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.

Azure Power Global

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Power Global are ranked lower than 6 (%) 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.

Pair Trading with System1 and Azure Power

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

The idea behind System1 and Azure Power Global 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 Stocks Directory module to find actively traded stocks across global markets.