Correlation Between Rama Steel and Globus Spirits

Can any of the company-specific risk be diversified away by investing in both Rama Steel and Globus Spirits 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 Rama Steel and Globus Spirits into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rama Steel Tubes and Globus Spirits Limited, you can compare the effects of market volatilities on Rama Steel and Globus Spirits 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 Rama Steel with a short position of Globus Spirits. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rama Steel and Globus Spirits.

Diversification Opportunities for Rama Steel and Globus Spirits

0.78

Correlation Coefficient

Rama Steel  Globus Spirits

Poor diversification

The 3 months correlation between Rama and Globus is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Globus Spirits Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Spirits and Rama Steel 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 Rama Steel Tubes are associated (or correlated) with Globus Spirits. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Spirits has no effect on the direction of Rama Steel i.e., Rama Steel and Globus Spirits go up and down completely randomly.

Pair Corralation between Rama Steel and Globus Spirits

Assuming the 90 days trading horizon Rama Steel Tubes is expected to under-perform the Globus Spirits. But the stock apears to be less risky and, when comparing its historical volatility, Rama Steel Tubes is 1.54 times less risky than Globus Spirits. The stock trades about -0.49 of its potential returns per unit of risk. The Globus Spirits Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  90,725  in Globus Spirits Limited on October 7, 2024 and sell it today you would lose (1,835) from holding Globus Spirits Limited or give up 2.02% of portfolio value over 90 days.

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

Rama Steel Tubes  vs.  Globus Spirits Limited

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rama Steel Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Globus Spirits

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globus Spirits Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Rama Steel and Globus Spirits

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

The idea behind Rama Steel Tubes and Globus Spirits 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.