Correlation Between Cambridge Technology and Rajnandini Metal

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

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

Diversification Opportunities for Cambridge Technology and Rajnandini Metal

0.96

Correlation Coefficient

Cambridge Technology  Rajnandini Metal

Almost no diversification

The 3 months correlation between Cambridge and Rajnandini is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Cambridge Technology 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 Cambridge Technology Enterprises 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 Cambridge Technology i.e., Cambridge Technology and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Cambridge Technology and Rajnandini Metal

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to under-perform the Rajnandini Metal. In addition to that, Cambridge Technology is 1.4 times more volatile than Rajnandini Metal Limited. It trades about -0.43 of its total potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.46 per unit of volatility. If you would invest  892.00  in Rajnandini Metal Limited on December 27, 2024 and sell it today you would lose (478.00) from holding Rajnandini Metal Limited or give up 53.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Cambridge Technology Enterpris  vs.  Rajnandini Metal Limited

Cambridge Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambridge Technology Enterprises 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rajnandini Metal

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cambridge Technology and Rajnandini Metal

The main advantage of trading using opposite Cambridge Technology and Rajnandini Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambridge Technology 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 Cambridge Technology Enterprises 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.