Correlation Between AU Small and Salzer Electronics

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

By analyzing existing cross correlation between AU Small Finance and Salzer Electronics Limited, you can compare the effects of market volatilities on AU Small and Salzer Electronics 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 AU Small with a short position of Salzer Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Small and Salzer Electronics.

Diversification Opportunities for AU Small and Salzer Electronics

-0.73

Correlation Coefficient

AU Small  Salzer Electronics

Pay attention - limited upside

The 3 months correlation between AUBANK and Salzer is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding AU Small Finance and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics and AU Small 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 AU Small Finance are associated (or correlated) with Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of AU Small i.e., AU Small and Salzer Electronics go up and down completely randomly.

Pair Corralation between AU Small and Salzer Electronics

Assuming the 90 days trading horizon AU Small is expected to generate 2.04 times less return on investment than Salzer Electronics. But when comparing it to its historical volatility, AU Small Finance is 1.91 times less risky than Salzer Electronics. It trades about 0.04 of its potential returns per unit of risk. Salzer Electronics Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  72,244  in Salzer Electronics Limited on March 23, 2025 and sell it today you would earn a total of  16,336  from holding Salzer Electronics Limited or generate 22.61% return on investment over 90 days.

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

AU Small Finance  vs.  Salzer Electronics Limited

AU Small Finance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AU Small Finance are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AU Small sustained solid returns over the last few months and may actually be approaching a breakup point.

Salzer Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salzer Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in July 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AU Small and Salzer Electronics

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

The idea behind AU Small Finance and Salzer Electronics Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.