Correlation Between City Union and Reliance Home

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

By analyzing existing cross correlation between City Union Bank and Reliance Home Finance, you can compare the effects of market volatilities on City Union and Reliance Home 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 City Union with a short position of Reliance Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Union and Reliance Home.

Diversification Opportunities for City Union and Reliance Home

-0.67

Correlation Coefficient

City Union  Reliance Home

Excellent diversification

The 3 months correlation between City and Reliance is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and Reliance Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Home Finance and City Union 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 City Union Bank are associated (or correlated) with Reliance Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Home Finance has no effect on the direction of City Union i.e., City Union and Reliance Home go up and down completely randomly.

Pair Corralation between City Union and Reliance Home

Assuming the 90 days trading horizon City Union is expected to generate 95.0 times less return on investment than Reliance Home. But when comparing it to its historical volatility, City Union Bank is 2.76 times less risky than Reliance Home. It trades about 0.02 of its potential returns per unit of risk. Reliance Home Finance is currently generating about 0.74 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Reliance Home Finance on September 25, 2024 and sell it today you would earn a total of  192.00  from holding Reliance Home Finance or generate 76.19% return on investment over 90 days.

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

City Union Bank  vs.  Reliance Home Finance

City Union Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, City Union is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Reliance Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with City Union and Reliance Home

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

The idea behind City Union Bank and Reliance Home Finance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.