Correlation Between Rajnandini Metal and Sportking India

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

Diversification Opportunities for Rajnandini Metal and Sportking India

0.25

Correlation Coefficient

Rajnandini Metal  Sportking India

Modest diversification

The 3 months correlation between Rajnandini and Sportking is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited and Sportking India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportking India 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 Sportking India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportking India has no effect on the direction of Rajnandini Metal i.e., Rajnandini Metal and Sportking India go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Sportking India

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the Sportking India. But the stock apears to be less risky and, when comparing its historical volatility, Rajnandini Metal Limited is 1.36 times less risky than Sportking India. The stock trades about -0.07 of its potential returns per unit of risk. The Sportking India Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  11,345  in Sportking India Limited on September 29, 2024 and sell it today you would lose (658.00) from holding Sportking India Limited or give up 5.8% of portfolio value over 90 days.

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

Rajnandini Metal Limited  vs.  Sportking 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 latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sportking India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sportking India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Sportking India is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Rajnandini Metal and Sportking India

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

The idea behind Rajnandini Metal Limited and Sportking 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.