Correlation Between Rajnandini Metal and 3M India

Can any of the company-specific risk be diversified away by investing in both Rajnandini Metal and 3M India 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 Rajnandini Metal and 3M India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rajnandini Metal Limited and 3M India Limited, you can compare the effects of market volatilities on Rajnandini Metal and 3M India 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 Rajnandini Metal with a short position of 3M India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rajnandini Metal and 3M India.

Diversification Opportunities for Rajnandini Metal and 3M India

0.66

Correlation Coefficient

Rajnandini Metal  3M India

Poor diversification

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

Pair Corralation between Rajnandini Metal and 3M India

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the 3M India. In addition to that, Rajnandini Metal is 1.39 times more volatile than 3M India Limited. It trades about -0.12 of its total potential returns per unit of risk. 3M India Limited is currently generating about -0.1 per unit of volatility. If you would invest  3,566,815  in 3M India Limited on August 31, 2024 and sell it today you would lose (362,600) from holding 3M India Limited or give up 10.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Rajnandini Metal Limited  vs.  3M India Limited

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

3M India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rajnandini Metal and 3M India

The main advantage of trading using opposite Rajnandini Metal and 3M India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal position performs unexpectedly, 3M India 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 3M India will offset losses from the drop in 3M India's long position.

The idea behind Rajnandini Metal Limited and 3M India 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.