Correlation Between Rashtriya Chemicals and Coal India

Can any of the company-specific risk be diversified away by investing in both Rashtriya Chemicals and Coal India 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 Rashtriya Chemicals and Coal India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rashtriya Chemicals and and Coal India Limited, you can compare the effects of market volatilities on Rashtriya Chemicals and Coal India 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 Rashtriya Chemicals with a short position of Coal India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rashtriya Chemicals and Coal India.

Diversification Opportunities for Rashtriya Chemicals and Coal India

-0.19

Correlation Coefficient

Rashtriya Chemicals  Coal India

Good diversification

The 3 months correlation between Rashtriya and Coal is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Rashtriya Chemicals and and Coal India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coal India Limited and Rashtriya Chemicals 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 Rashtriya Chemicals and are associated (or correlated) with Coal India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coal India Limited has no effect on the direction of Rashtriya Chemicals i.e., Rashtriya Chemicals and Coal India go up and down completely randomly.

Pair Corralation between Rashtriya Chemicals and Coal India

Assuming the 90 days trading horizon Rashtriya Chemicals and is expected to generate 2.27 times more return on investment than Coal India. However, Rashtriya Chemicals is 2.27 times more volatile than Coal India Limited. It trades about 0.1 of its potential returns per unit of risk. Coal India Limited is currently generating about -0.07 per unit of risk. If you would invest  15,263  in Rashtriya Chemicals and on October 21, 2024 and sell it today you would earn a total of  1,709  from holding Rashtriya Chemicals and or generate 11.2% return on investment over 90 days.

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

Rashtriya Chemicals and  vs.  Coal India Limited

Rashtriya Chemicals and

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rashtriya Chemicals and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rashtriya Chemicals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Coal India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coal India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rashtriya Chemicals and Coal India

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

The idea behind Rashtriya Chemicals and and Coal India 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.