Correlation Between Polar Capital and Reliance Industries

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

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

Diversification Opportunities for Polar Capital and Reliance Industries

-0.9

Correlation Coefficient

Polar Capital  Reliance Industries

Pay attention - limited upside

The 3 months correlation between Polar and Reliance is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Polar Capital 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 Polar Capital Technology 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 Polar Capital i.e., Polar Capital and Reliance Industries go up and down completely randomly.

Pair Corralation between Polar Capital and Reliance Industries

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 1.07 times more return on investment than Reliance Industries. However, Polar Capital is 1.07 times more volatile than Reliance Industries Limited. It trades about 0.23 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about -0.17 per unit of risk. If you would invest  28,200  in Polar Capital Technology on September 5, 2024 and sell it today you would earn a total of  6,150  from holding Polar Capital Technology or generate 21.81% return on investment over 90 days.

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

Polar Capital Technology  vs.  Reliance Industries Limited

Polar Capital Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Polar Capital exhibited 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 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Polar Capital and Reliance Industries

The main advantage of trading using opposite Polar Capital and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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 Polar Capital Technology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.