Correlation Between Radico Khaitan and United Spirits

Can any of the company-specific risk be diversified away by investing in both Radico Khaitan and United Spirits 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 Radico Khaitan and United Spirits into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Radico Khaitan and United Spirits

-0.44

Correlation Coefficient

Radico Khaitan  United Spirits

Very good diversification

The 3 months correlation between Radico and United is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Radico Khaitan Limited and United Spirits Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Spirits and Radico Khaitan 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 Radico Khaitan Limited are associated (or correlated) with United Spirits. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Spirits has no effect on the direction of Radico Khaitan i.e., Radico Khaitan and United Spirits go up and down completely randomly.

Pair Corralation between Radico Khaitan and United Spirits

Assuming the 90 days trading horizon Radico Khaitan Limited is expected to generate 1.75 times more return on investment than United Spirits. However, Radico Khaitan is 1.75 times more volatile than United Spirits Limited. It trades about 0.14 of its potential returns per unit of risk. United Spirits Limited is currently generating about 0.0 per unit of risk. If you would invest  203,695  in Radico Khaitan Limited on September 13, 2024 and sell it today you would earn a total of  39,560  from holding Radico Khaitan Limited or generate 19.42% return on investment over 90 days.

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

Radico Khaitan Limited  vs.  United Spirits Limited

Radico Khaitan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Radico Khaitan sustained solid returns over the last few months and may actually be approaching a breakup point.

United Spirits

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Spirits Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, United Spirits is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Radico Khaitan and United Spirits

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

The idea behind Radico Khaitan Limited and United Spirits 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.