Correlation Between AU Small and Silgo Retail

Can any of the company-specific risk be diversified away by investing in both AU Small and Silgo Retail 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 Silgo Retail 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 Silgo Retail Limited, you can compare the effects of market volatilities on AU Small and Silgo Retail 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 Silgo Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Small and Silgo Retail.

Diversification Opportunities for AU Small and Silgo Retail

0.79

Correlation Coefficient

AU Small  Silgo Retail

Poor diversification

The 3 months correlation between AUBANK and Silgo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AU Small Finance and Silgo Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgo Retail Limited 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 Silgo Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgo Retail Limited has no effect on the direction of AU Small i.e., AU Small and Silgo Retail go up and down completely randomly.

Pair Corralation between AU Small and Silgo Retail

Assuming the 90 days trading horizon AU Small is expected to generate 2.63 times less return on investment than Silgo Retail. But when comparing it to its historical volatility, AU Small Finance is 1.88 times less risky than Silgo Retail. It trades about 0.04 of its potential returns per unit of risk. Silgo Retail Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,663  in Silgo Retail Limited on March 21, 2025 and sell it today you would earn a total of  1,647  from holding Silgo Retail Limited or generate 44.96% return on investment over 90 days.

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

AU Small Finance  vs.  Silgo Retail 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 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, AU Small sustained solid returns over the last few months and may actually be approaching a breakup point.

Silgo Retail Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silgo Retail Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Silgo Retail displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AU Small and Silgo Retail

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

The idea behind AU Small Finance and Silgo Retail 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.