Correlation Between Centum Electronics and Reliance Infrastructure

Can any of the company-specific risk be diversified away by investing in both Centum Electronics and Reliance Infrastructure 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 Centum Electronics and Reliance Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centum Electronics Limited and Reliance Infrastructure Limited, you can compare the effects of market volatilities on Centum Electronics and Reliance Infrastructure 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 Centum Electronics with a short position of Reliance Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centum Electronics and Reliance Infrastructure.

Diversification Opportunities for Centum Electronics and Reliance Infrastructure

0.81

Correlation Coefficient

Centum Electronics  Reliance Infrastructure

Very poor diversification

The 3 months correlation between Centum and Reliance is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Centum Electronics Limited and Reliance Infrastructure Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Infrastructure and Centum Electronics 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 Centum Electronics Limited are associated (or correlated) with Reliance Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Infrastructure has no effect on the direction of Centum Electronics i.e., Centum Electronics and Reliance Infrastructure go up and down completely randomly.

Pair Corralation between Centum Electronics and Reliance Infrastructure

Assuming the 90 days trading horizon Centum Electronics Limited is expected to under-perform the Reliance Infrastructure. But the stock apears to be less risky and, when comparing its historical volatility, Centum Electronics Limited is 1.02 times less risky than Reliance Infrastructure. The stock trades about -0.1 of its potential returns per unit of risk. The Reliance Infrastructure Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  29,895  in Reliance Infrastructure Limited on December 27, 2024 and sell it today you would lose (4,517) from holding Reliance Infrastructure Limited or give up 15.11% of portfolio value over 90 days.

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

Centum Electronics Limited  vs.  Reliance Infrastructure Limite

Centum Electronics

Risk-Adjusted Performance

Very Weak

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

Reliance Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Infrastructure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Centum Electronics and Reliance Infrastructure

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

The idea behind Centum Electronics Limited and Reliance Infrastructure 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..