Correlation Between Future Retail and Indian Railway

Can any of the company-specific risk be diversified away by investing in both Future Retail and Indian Railway 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 Future Retail and Indian Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Future Retail Limited and Indian Railway Finance, you can compare the effects of market volatilities on Future Retail and Indian Railway 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 Future Retail with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Retail and Indian Railway.

Diversification Opportunities for Future Retail and Indian Railway

0.0

Correlation Coefficient

Future Retail  Indian Railway

Pay attention - limited upside

The 3 months correlation between Future and Indian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Future Retail Limited and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and Future Retail 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 Future Retail Limited are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of Future Retail i.e., Future Retail and Indian Railway go up and down completely randomly.

Pair Corralation between Future Retail and Indian Railway

If you would invest  14,167  in Indian Railway Finance on September 22, 2024 and sell it today you would earn a total of  674.00  from holding Indian Railway Finance or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Future Retail Limited  vs.  Indian Railway Finance

Future Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Indian Railway Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Railway Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indian Railway is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Future Retail and Indian Railway

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

The idea behind Future Retail Limited and Indian Railway 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.