Correlation Between Persistent Systems and Reliance Industries

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

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

Diversification Opportunities for Persistent Systems and Reliance Industries

-0.66

Correlation Coefficient

Persistent Systems  Reliance Industries

Excellent diversification

The 3 months correlation between Persistent and Reliance is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Persistent Systems 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 Persistent Systems 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 Persistent Systems 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 Persistent Systems i.e., Persistent Systems and Reliance Industries go up and down completely randomly.

Pair Corralation between Persistent Systems and Reliance Industries

Assuming the 90 days trading horizon Persistent Systems Limited is expected to generate 1.73 times more return on investment than Reliance Industries. However, Persistent Systems is 1.73 times more volatile than Reliance Industries Limited. It trades about 0.14 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  535,100  in Persistent Systems Limited on September 13, 2024 and sell it today you would earn a total of  100,875  from holding Persistent Systems Limited or generate 18.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Persistent Systems Limited  vs.  Reliance Industries Limited

Persistent Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Persistent Systems Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Persistent Systems 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 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Persistent Systems and Reliance Industries

The main advantage of trading using opposite Persistent Systems and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Persistent Systems 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 Persistent Systems 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.