Correlation Between Ratnamani Metals and Rico Auto

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

Diversification Opportunities for Ratnamani Metals and Rico Auto

0.57

Correlation Coefficient

Ratnamani Metals  Rico Auto

Very weak diversification

The 3 months correlation between Ratnamani and Rico is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ratnamani Metals Tubes and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto 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 Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of Ratnamani Metals i.e., Ratnamani Metals and Rico Auto go up and down completely randomly.

Pair Corralation between Ratnamani Metals and Rico Auto

Assuming the 90 days trading horizon Ratnamani Metals Tubes is expected to under-perform the Rico Auto. But the stock apears to be less risky and, when comparing its historical volatility, Ratnamani Metals Tubes is 2.1 times less risky than Rico Auto. The stock trades about -0.1 of its potential returns per unit of risk. The Rico Auto Industries is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,400  in Rico Auto Industries on October 5, 2024 and sell it today you would lose (477.00) from holding Rico Auto Industries or give up 4.59% of portfolio value over 90 days.

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

Ratnamani Metals Tubes  vs.  Rico Auto 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.

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rico Auto 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 Rico Auto

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

The idea behind Ratnamani Metals Tubes and Rico Auto 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.