Correlation Between Gangotri Textiles and Reliance Industries

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

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

Diversification Opportunities for Gangotri Textiles and Reliance Industries

0.42

Correlation Coefficient

Gangotri Textiles  Reliance Industries

Very weak diversification

The 3 months correlation between Gangotri and Reliance is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gangotri Textiles Limited and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Gangotri Textiles 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 Gangotri Textiles Limited are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Gangotri Textiles i.e., Gangotri Textiles and Reliance Industries go up and down completely randomly.

Pair Corralation between Gangotri Textiles and Reliance Industries

Assuming the 90 days trading horizon Gangotri Textiles Limited is expected to generate 1.3 times more return on investment than Reliance Industries. However, Gangotri Textiles is 1.3 times more volatile than Reliance Industries Limited. It trades about -0.01 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about -0.05 per unit of risk. If you would invest  117.00  in Gangotri Textiles Limited on October 21, 2024 and sell it today you would lose (2.00) from holding Gangotri Textiles Limited or give up 1.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Gangotri Textiles Limited  vs.  Reliance Industries Limited

Gangotri Textiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gangotri Textiles Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gangotri Textiles is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Reliance Industries is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gangotri Textiles and Reliance Industries

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

The idea behind Gangotri Textiles Limited and Reliance Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.