Correlation Between Renuka Agri and Pan Asia

Can any of the company-specific risk be diversified away by investing in both Renuka Agri and Pan Asia 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 Renuka Agri and Pan Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Renuka Agri Foods and Pan Asia Banking, you can compare the effects of market volatilities on Renuka Agri and Pan Asia 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 Renuka Agri with a short position of Pan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renuka Agri and Pan Asia.

Diversification Opportunities for Renuka Agri and Pan Asia

0.8

Correlation Coefficient

Renuka Agri  Pan Asia

Very poor diversification

The 3 months correlation between Renuka and Pan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Renuka Agri Foods and Pan Asia Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Asia Banking and Renuka Agri 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 Renuka Agri Foods are associated (or correlated) with Pan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Asia Banking has no effect on the direction of Renuka Agri i.e., Renuka Agri and Pan Asia go up and down completely randomly.

Pair Corralation between Renuka Agri and Pan Asia

Assuming the 90 days trading horizon Renuka Agri Foods is expected to under-perform the Pan Asia. But the stock apears to be less risky and, when comparing its historical volatility, Renuka Agri Foods is 1.79 times less risky than Pan Asia. The stock trades about -0.41 of its potential returns per unit of risk. The Pan Asia Banking is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  3,860  in Pan Asia Banking on December 4, 2024 and sell it today you would lose (250.00) from holding Pan Asia Banking or give up 6.48% of portfolio value over 90 days.

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

Renuka Agri Foods  vs.  Pan Asia Banking

Renuka Agri Foods

Risk-Adjusted Performance

Insignificant

Over the last 90 days Renuka Agri Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Renuka Agri is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pan Asia Banking

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Asia Banking are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Asia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renuka Agri and Pan Asia

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

The idea behind Renuka Agri Foods and Pan Asia Banking 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..