Correlation Between Ratnamani Metals and Raj Rayon

Can any of the company-specific risk be diversified away by investing in both Ratnamani Metals and Raj Rayon 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 Raj Rayon 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 Raj Rayon Industries, you can compare the effects of market volatilities on Ratnamani Metals and Raj Rayon 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 Raj Rayon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ratnamani Metals and Raj Rayon.

Diversification Opportunities for Ratnamani Metals and Raj Rayon

0.07

Correlation Coefficient

Ratnamani Metals  Raj Rayon

Significant diversification

The 3 months correlation between Ratnamani and Raj is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ratnamani Metals Tubes and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries 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 Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of Ratnamani Metals i.e., Ratnamani Metals and Raj Rayon go up and down completely randomly.

Pair Corralation between Ratnamani Metals and Raj Rayon

Assuming the 90 days trading horizon Ratnamani Metals is expected to generate 431.5 times less return on investment than Raj Rayon. In addition to that, Ratnamani Metals is 1.22 times more volatile than Raj Rayon Industries. It trades about 0.0 of its total potential returns per unit of risk. Raj Rayon Industries is currently generating about 0.11 per unit of volatility. If you would invest  1,560  in Raj Rayon Industries on October 9, 2024 and sell it today you would earn a total of  741.00  from holding Raj Rayon Industries or generate 47.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Ratnamani Metals Tubes  vs.  Raj Rayon Industries

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

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

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Raj Rayon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ratnamani Metals and Raj Rayon

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

The idea behind Ratnamani Metals Tubes and Raj Rayon Industries 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.