Correlation Between Associated Alcohols and Rico Auto

Can any of the company-specific risk be diversified away by investing in both Associated Alcohols and Rico Auto 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 Associated Alcohols and Rico Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Alcohols Breweries and Rico Auto Industries, you can compare the effects of market volatilities on Associated Alcohols and Rico Auto 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 Associated Alcohols with a short position of Rico Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and Rico Auto.

Diversification Opportunities for Associated Alcohols and Rico Auto

-0.16

Correlation Coefficient

Associated Alcohols  Rico Auto

Good diversification

The 3 months correlation between Associated and Rico is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Rico Auto go up and down completely randomly.

Pair Corralation between Associated Alcohols and Rico Auto

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 0.82 times more return on investment than Rico Auto. However, Associated Alcohols Breweries is 1.22 times less risky than Rico Auto. It trades about 0.1 of its potential returns per unit of risk. Rico Auto Industries is currently generating about 0.02 per unit of risk. If you would invest  40,064  in Associated Alcohols Breweries on September 27, 2024 and sell it today you would earn a total of  70,581  from holding Associated Alcohols Breweries or generate 176.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.36%
Values	Daily Returns

Associated Alcohols Breweries  vs.  Rico Auto Industries

Associated Alcohols

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Associated Alcohols and Rico Auto

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

The idea behind Associated Alcohols Breweries and Rico Auto Industries 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.