Relationship of Nifty 50 Index with Swan Energy Limited
Author: Siddesh Ghule
Introduction:
Swan Energy is an emerging company based in Edinburgh, Scotland that focuses on developing energy storage solutions for grid-scale applications. The company has developed a unique technology that utilizes capacitive energy storage to provide power when traditional energy sources are not available. The technology is designed to be cost-effective and environmentally friendly, making it an attractive solution for renewable energy applications. Swan Energy has received funding from several investors and has partnered with several major players in the energy industry.
Objective: To find Beta (β) of Swan Energy Limited and its significance
Data Collection:
Nifty 50 Index and Swan energy Limited data was collected from nseindia.com website for the period of one year dating from 1st February 2023 to 31st January 2024. The historical data collected was manipulated using Microsoft Excel to get Friday closing prices of both, the index and the company. Weekly returns were based on the closing prices were calculated using Excel tools and with use of Regression analysis, weekly returns of Swan Energy Limited were regressed on weekly returns of Nifty 50 Index.
Data Analysis:
Equation of regression of weekly returns of Swan Energy Limited on weekly returns of Nifty 50 Index-
Format of Regression equation is Y = α + β(X)
weekly returns of Swan Energy Limited = -2.14459 + 2.174954 × weekly returns of Nifty 50 Index
(3.009065)
Where,
Number of Observations = 48,
R Square = 0.167506,
F = 9.054472,
P-value = 0.004282
Interpretation-
The above equation shows relationship between weekly returns of Swan Energy Limited Company and weekly returns of Nifty 50 Index.
Negative sign means inverse relation, meaning if weekly returns of Nifty 50 Index rise then weekly returns of Swan Energy Limited Company falls and vice-versa.
If weekly returns of Nifty 50 Index rise by 1-unit, weekly returns of Swan Energy Limited Company will fall by 2.174954 unit and vice-versa.
Figure in bracket shows t-stat for β, P-value for which is 0.004282, which is less than 0.05 meaning β is statistically significant at 5% significance level.
Number of Observations are 48, R-square value is 0.167506 meaning approximately 16.75% of weekly returns of swan energy Limited are explained by weekly returns of Nifty 50 Index. Balance 83.25% (approximate) is error due to other variables which are not in the model.
F is 9.054472, the P-value of which is 0.004282, which is less than 0.05 meaning overall, the model is statistically significant at 5% significance level.
Conclusion:
As β (2.174954) is greater than 1, it is good to invest in Swan Energy Limited for short term.
