Correlation Between Gokul Refoils and Rainbow Childrens

Can any of the company-specific risk be diversified away by investing in both Gokul Refoils and Rainbow Childrens 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 Gokul Refoils and Rainbow Childrens into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gokul Refoils and and Rainbow Childrens Medicare, you can compare the effects of market volatilities on Gokul Refoils and Rainbow Childrens 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 Gokul Refoils with a short position of Rainbow Childrens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gokul Refoils and Rainbow Childrens.

Diversification Opportunities for Gokul Refoils and Rainbow Childrens

0.53

Correlation Coefficient

Gokul Refoils  Rainbow Childrens

Very weak diversification

The 3 months correlation between Gokul and Rainbow is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gokul Refoils and and Rainbow Childrens Medicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Childrens and Gokul Refoils 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 Gokul Refoils and are associated (or correlated) with Rainbow Childrens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Childrens has no effect on the direction of Gokul Refoils i.e., Gokul Refoils and Rainbow Childrens go up and down completely randomly.

Pair Corralation between Gokul Refoils and Rainbow Childrens

Assuming the 90 days trading horizon Gokul Refoils is expected to generate 2.26 times less return on investment than Rainbow Childrens. In addition to that, Gokul Refoils is 1.34 times more volatile than Rainbow Childrens Medicare. It trades about 0.05 of its total potential returns per unit of risk. Rainbow Childrens Medicare is currently generating about 0.16 per unit of volatility. If you would invest  126,615  in Rainbow Childrens Medicare on September 3, 2024 and sell it today you would earn a total of  32,325  from holding Rainbow Childrens Medicare or generate 25.53% return on investment over 90 days.

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

Gokul Refoils and  vs.  Rainbow Childrens Medicare

Gokul Refoils

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gokul Refoils and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Gokul Refoils may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rainbow Childrens

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Rainbow Childrens showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gokul Refoils and Rainbow Childrens

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

The idea behind Gokul Refoils and and Rainbow Childrens Medicare 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.