An Analysis of Correlation Between Stocks and Its Impact on Investment Risk
Year: 2024
Type: article
Abstract: ABSTRACT The research paper investigates the correlation between stocks and volatility dynamics within the Indian stock markets and their implications for investment strategies. Utilizing historical data spanning multiple sectors and market indices, this research conducts a comprehensive analysis of correlation coefficients among various stocks and asset classes. Through statistical techniques, including correlation matrices and time-series analysis, this research identifies the degree of interdependence among different stocks and sectors. Moreover, this study also examines the stability of correlations over different market conditions and time periods. The analysis encompasses a nuanced examination of correlation coefficients, shedding light on the degree and nature of interdependence among different segments of the Indian equity market. The study scrutinizes the stability of correlations and time horizons. Furthermore, this research analyses the standard deviation of returns as a measure of volatility and explores its determinants, including macroeconomic indicators, investor sentiment and global market trends. This research investigates how changes in volatility impact investment decisions and risk management strategies for market participants. Based on the findings, this research provides practical insights and recommendations for investors, portfolio managers, and policymakers to navigate the challenges posed by volatility and correlations in the Indian stock market effectively. This research emphasizes the importance of dynamic asset allocation, active risk monitoring and the integration of alternative investment strategies to achieve optimal risk-adjusted returns in a volatile market environment. Keywords: Stock Market, Equity Shares, Weightage of the stocks, Standard Deviation of Security Returns, Stock volatility, Correlation between stocks, Markowitz Model, Diversification.
Author: Dr. Veena Kolte, Mr. Kartik S. Mhavarkkar and Mr. Sushmit Saraf
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6949848967
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