Correlation Between Rajnandini Metal and Cholamandalam Financial

Can any of the company-specific risk be diversified away by investing in both Rajnandini Metal and Cholamandalam Financial 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 Cholamandalam Financial 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 Cholamandalam Financial Holdings, you can compare the effects of market volatilities on Rajnandini Metal and Cholamandalam Financial 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 Cholamandalam Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rajnandini Metal and Cholamandalam Financial.

Diversification Opportunities for Rajnandini Metal and Cholamandalam Financial

0.65

Correlation Coefficient

Rajnandini Metal  Cholamandalam Financial

Poor diversification

The 3 months correlation between Rajnandini and Cholamandalam is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial 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 Cholamandalam Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of Rajnandini Metal i.e., Rajnandini Metal and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Cholamandalam Financial

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the Cholamandalam Financial. In addition to that, Rajnandini Metal is 1.56 times more volatile than Cholamandalam Financial Holdings. It trades about -0.03 of its total potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about 0.1 per unit of volatility. If you would invest  59,588  in Cholamandalam Financial Holdings on October 9, 2024 and sell it today you would earn a total of  94,232  from holding Cholamandalam Financial Holdings or generate 158.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Rajnandini Metal Limited  vs.  Cholamandalam Financial Holdin

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Rajnandini Metal and Cholamandalam Financial

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

The idea behind Rajnandini Metal Limited and Cholamandalam Financial Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..