Correlation Between Ratnamani Metals and Gujarat Lease

Can any of the company-specific risk be diversified away by investing in both Ratnamani Metals and Gujarat Lease 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 Ratnamani Metals and Gujarat Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ratnamani Metals Tubes and Gujarat Lease Financing, you can compare the effects of market volatilities on Ratnamani Metals and Gujarat Lease 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 Ratnamani Metals with a short position of Gujarat Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ratnamani Metals and Gujarat Lease.

Diversification Opportunities for Ratnamani Metals and Gujarat Lease

0.79

Correlation Coefficient

Ratnamani Metals  Gujarat Lease

Poor diversification

The 3 months correlation between Ratnamani and Gujarat is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ratnamani Metals Tubes and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Ratnamani Metals 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 Ratnamani Metals Tubes are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Ratnamani Metals i.e., Ratnamani Metals and Gujarat Lease go up and down completely randomly.

Pair Corralation between Ratnamani Metals and Gujarat Lease

Assuming the 90 days trading horizon Ratnamani Metals Tubes is expected to generate 0.55 times more return on investment than Gujarat Lease. However, Ratnamani Metals Tubes is 1.82 times less risky than Gujarat Lease. It trades about -0.18 of its potential returns per unit of risk. Gujarat Lease Financing is currently generating about -0.18 per unit of risk. If you would invest  320,065  in Ratnamani Metals Tubes on December 28, 2024 and sell it today you would lose (65,390) from holding Ratnamani Metals Tubes or give up 20.43% of portfolio value over 90 days.

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

Ratnamani Metals Tubes  vs.  Gujarat Lease Financing

Ratnamani Metals Tubes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gujarat Lease Financing

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ratnamani Metals and Gujarat Lease

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

The idea behind Ratnamani Metals Tubes and Gujarat Lease Financing 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .