Correlation Between DCM Shriram and Asian Paints

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

By analyzing existing cross correlation between DCM Shriram Limited and Asian Paints Limited, you can compare the effects of market volatilities on DCM Shriram and Asian Paints 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 DCM Shriram with a short position of Asian Paints. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCM Shriram and Asian Paints.

Diversification Opportunities for DCM Shriram and Asian Paints

0.44

Correlation Coefficient

DCM Shriram  Asian Paints

Very weak diversification

The 3 months correlation between DCM and Asian is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DCM Shriram Limited and Asian Paints Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Paints Limited and DCM Shriram 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 DCM Shriram Limited are associated (or correlated) with Asian Paints. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Paints Limited has no effect on the direction of DCM Shriram i.e., DCM Shriram and Asian Paints go up and down completely randomly.

Pair Corralation between DCM Shriram and Asian Paints

Assuming the 90 days trading horizon DCM Shriram Limited is expected to generate 2.24 times more return on investment than Asian Paints. However, DCM Shriram is 2.24 times more volatile than Asian Paints Limited. It trades about 0.18 of its potential returns per unit of risk. Asian Paints Limited is currently generating about -0.04 per unit of risk. If you would invest  106,680  in DCM Shriram Limited on April 24, 2025 and sell it today you would earn a total of  33,160  from holding DCM Shriram Limited or generate 31.08% return on investment over 90 days.

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

DCM Shriram Limited  vs.  Asian Paints Limited

DCM Shriram Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DCM Shriram Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, DCM Shriram demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Asian Paints Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asian Paints Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Asian Paints is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DCM Shriram and Asian Paints

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

The idea behind DCM Shriram Limited and Asian Paints 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.