Correlation Between Infomedia Press and Reliance Power

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

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

Diversification Opportunities for Infomedia Press and Reliance Power

0.66

Correlation Coefficient

Infomedia Press  Reliance Power

Poor diversification

The 3 months correlation between Infomedia and Reliance is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Infomedia Press Limited and Reliance Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Power and Infomedia Press 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 Infomedia Press Limited are associated (or correlated) with Reliance Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Power has no effect on the direction of Infomedia Press i.e., Infomedia Press and Reliance Power go up and down completely randomly.

Pair Corralation between Infomedia Press and Reliance Power

Assuming the 90 days trading horizon Infomedia Press Limited is expected to under-perform the Reliance Power. But the stock apears to be less risky and, when comparing its historical volatility, Infomedia Press Limited is 1.3 times less risky than Reliance Power. The stock trades about -0.11 of its potential returns per unit of risk. The Reliance Power Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,185  in Reliance Power Limited on December 29, 2024 and sell it today you would earn a total of  113.00  from holding Reliance Power Limited or generate 2.7% return on investment over 90 days.

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

Infomedia Press Limited  vs.  Reliance Power Limited

Infomedia Press

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infomedia Press Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Reliance Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Power Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Reliance Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Infomedia Press and Reliance Power

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

The idea behind Infomedia Press Limited and Reliance Power 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.