Correlation Between Bodal Chemicals and Indo Rama

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

By analyzing existing cross correlation between Bodal Chemicals Limited and Indo Rama Synthetics, you can compare the effects of market volatilities on Bodal Chemicals and Indo Rama 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 Bodal Chemicals with a short position of Indo Rama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodal Chemicals and Indo Rama.

Diversification Opportunities for Bodal Chemicals and Indo Rama

0.8

Correlation Coefficient

Bodal Chemicals  Indo Rama

Very poor diversification

The 3 months correlation between Bodal and Indo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bodal Chemicals Limited and Indo Rama Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Rama Synthetics and Bodal Chemicals 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 Bodal Chemicals Limited are associated (or correlated) with Indo Rama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Rama Synthetics has no effect on the direction of Bodal Chemicals i.e., Bodal Chemicals and Indo Rama go up and down completely randomly.

Pair Corralation between Bodal Chemicals and Indo Rama

Assuming the 90 days trading horizon Bodal Chemicals is expected to generate 1.78 times less return on investment than Indo Rama. But when comparing it to its historical volatility, Bodal Chemicals Limited is 1.27 times less risky than Indo Rama. It trades about 0.12 of its potential returns per unit of risk. Indo Rama Synthetics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,497  in Indo Rama Synthetics on April 4, 2025 and sell it today you would earn a total of  1,360  from holding Indo Rama Synthetics or generate 38.89% return on investment over 90 days.

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

Bodal Chemicals Limited  vs.  Indo Rama Synthetics

Bodal Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bodal Chemicals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, Bodal Chemicals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Indo Rama Synthetics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Rama Synthetics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Indo Rama displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bodal Chemicals and Indo Rama

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

The idea behind Bodal Chemicals Limited and Indo Rama Synthetics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.