Correlation Between Rainbow Childrens and Shemaroo Entertainment

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

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

Diversification Opportunities for Rainbow Childrens and Shemaroo Entertainment

0.22

Correlation Coefficient

Rainbow Childrens  Shemaroo Entertainment

Modest diversification

The 3 months correlation between Rainbow and Shemaroo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Childrens Medicare and Shemaroo Entertainment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shemaroo Entertainment and Rainbow Childrens 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 Rainbow Childrens Medicare are associated (or correlated) with Shemaroo Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shemaroo Entertainment has no effect on the direction of Rainbow Childrens i.e., Rainbow Childrens and Shemaroo Entertainment go up and down completely randomly.

Pair Corralation between Rainbow Childrens and Shemaroo Entertainment

Assuming the 90 days trading horizon Rainbow Childrens Medicare is expected to generate 0.89 times more return on investment than Shemaroo Entertainment. However, Rainbow Childrens Medicare is 1.12 times less risky than Shemaroo Entertainment. It trades about 0.05 of its potential returns per unit of risk. Shemaroo Entertainment Limited is currently generating about -0.04 per unit of risk. If you would invest  137,955  in Rainbow Childrens Medicare on October 23, 2024 and sell it today you would earn a total of  7,855  from holding Rainbow Childrens Medicare or generate 5.69% return on investment over 90 days.

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

Rainbow Childrens Medicare  vs.  Shemaroo Entertainment Limited

Rainbow Childrens

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Rainbow Childrens may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shemaroo Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shemaroo Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Rainbow Childrens and Shemaroo Entertainment

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

The idea behind Rainbow Childrens Medicare and Shemaroo Entertainment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.