Correlation Between Bodhi Tree and Rajnandini Metal

Can any of the company-specific risk be diversified away by investing in both Bodhi Tree and Rajnandini Metal 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 Bodhi Tree and Rajnandini Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bodhi Tree Multimedia and Rajnandini Metal Limited, you can compare the effects of market volatilities on Bodhi Tree and Rajnandini Metal 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 Bodhi Tree with a short position of Rajnandini Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and Rajnandini Metal.

Diversification Opportunities for Bodhi Tree and Rajnandini Metal

0.47

Correlation Coefficient

Bodhi Tree  Rajnandini Metal

Very weak diversification

The 3 months correlation between Bodhi and Rajnandini is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Bodhi Tree 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 Bodhi Tree Multimedia are associated (or correlated) with Rajnandini Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rajnandini Metal has no effect on the direction of Bodhi Tree i.e., Bodhi Tree and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Bodhi Tree and Rajnandini Metal

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to generate 1.46 times more return on investment than Rajnandini Metal. However, Bodhi Tree is 1.46 times more volatile than Rajnandini Metal Limited. It trades about -0.06 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.12 per unit of risk. If you would invest  1,231  in Bodhi Tree Multimedia on September 21, 2024 and sell it today you would lose (185.00) from holding Bodhi Tree Multimedia or give up 15.03% of portfolio value over 90 days.

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

Bodhi Tree Multimedia  vs.  Rajnandini Metal Limited

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bodhi Tree and Rajnandini Metal

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

The idea behind Bodhi Tree Multimedia and Rajnandini Metal 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.