Correlation Between Golden Metal and Reliance Industries

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

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

Diversification Opportunities for Golden Metal and Reliance Industries

-0.46

Correlation Coefficient

Golden Metal  Reliance Industries

Very good diversification

The 3 months correlation between Golden and Reliance is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Golden Metal Resources and Reliance Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Golden Metal 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 Golden Metal Resources 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 Golden Metal i.e., Golden Metal and Reliance Industries go up and down completely randomly.

Pair Corralation between Golden Metal and Reliance Industries

Assuming the 90 days trading horizon Golden Metal Resources is expected to under-perform the Reliance Industries. In addition to that, Golden Metal is 2.02 times more volatile than Reliance Industries Ltd. It trades about -0.28 of its total potential returns per unit of risk. Reliance Industries Ltd is currently generating about -0.19 per unit of volatility. If you would invest  5,960  in Reliance Industries Ltd on September 23, 2024 and sell it today you would lose (260.00) from holding Reliance Industries Ltd or give up 4.36% of portfolio value over 90 days.

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

Golden Metal Resources  vs.  Reliance Industries Ltd

Golden Metal Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Metal Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Golden Metal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Golden Metal and Reliance Industries

The main advantage of trading using opposite Golden Metal and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Metal 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 Golden Metal Resources and Reliance Industries Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.