Correlation Between Entertainment Network and Reliance Industrial

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

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

Diversification Opportunities for Entertainment Network and Reliance Industrial

0.68

Correlation Coefficient

Entertainment Network  Reliance Industrial

Poor diversification

The 3 months correlation between Entertainment and Reliance is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Entertainment Network Limited and Reliance Industrial Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industrial and Entertainment Network 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 Entertainment Network Limited are associated (or correlated) with Reliance Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industrial has no effect on the direction of Entertainment Network i.e., Entertainment Network and Reliance Industrial go up and down completely randomly.

Pair Corralation between Entertainment Network and Reliance Industrial

Assuming the 90 days trading horizon Entertainment Network Limited is expected to generate 1.12 times more return on investment than Reliance Industrial. However, Entertainment Network is 1.12 times more volatile than Reliance Industrial Infrastructure. It trades about 0.04 of its potential returns per unit of risk. Reliance Industrial Infrastructure is currently generating about 0.03 per unit of risk. If you would invest  13,207  in Entertainment Network Limited on October 4, 2024 and sell it today you would earn a total of  4,608  from holding Entertainment Network Limited or generate 34.89% return on investment over 90 days.

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

Entertainment Network Limited  vs.  Reliance Industrial Infrastruc

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entertainment Network Limited 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industrial Infrastructure 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 Entertainment Network and Reliance Industrial

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

The idea behind Entertainment Network Limited and Reliance Industrial Infrastructure 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.