Correlation Between DCM Shriram and Sterling

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

Diversification Opportunities for DCM Shriram and Sterling

0.7

Correlation Coefficient

DCM Shriram  Sterling

Poor diversification

The 3 months correlation between DCM and Sterling is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DCM Shriram Limited and Sterling and Wilson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling and Wilson 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 Sterling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling and Wilson has no effect on the direction of DCM Shriram i.e., DCM Shriram and Sterling go up and down completely randomly.

Pair Corralation between DCM Shriram and Sterling

Assuming the 90 days trading horizon DCM Shriram Limited is expected to generate 0.85 times more return on investment than Sterling. However, DCM Shriram Limited is 1.18 times less risky than Sterling. It trades about 0.18 of its potential returns per unit of risk. Sterling and Wilson is currently generating about -0.02 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	Significant
Accuracy	100.0%
Values	Daily Returns

DCM Shriram Limited  vs.  Sterling and Wilson

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.

Sterling and Wilson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling and Wilson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Sterling is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with DCM Shriram and Sterling

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

The idea behind DCM Shriram Limited and Sterling and Wilson 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.