Correlation Between Reliance Communications and BAG Films

Can any of the company-specific risk be diversified away by investing in both Reliance Communications and BAG Films 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 Reliance Communications and BAG Films into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Reliance Communications and BAG Films

0.71

Correlation Coefficient

Reliance Communications  BAG Films

Poor diversification

The 3 months correlation between Reliance and BAG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Communications Limite and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films and Reliance Communications 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 Reliance Communications Limited are associated (or correlated) with BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of Reliance Communications i.e., Reliance Communications and BAG Films go up and down completely randomly.

Pair Corralation between Reliance Communications and BAG Films

Assuming the 90 days trading horizon Reliance Communications Limited is expected to under-perform the BAG Films. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Communications Limited is 1.56 times less risky than BAG Films. The stock trades about -0.49 of its potential returns per unit of risk. The BAG Films and is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,101  in BAG Films and on October 10, 2024 and sell it today you would lose (121.00) from holding BAG Films and or give up 10.99% of portfolio value over 90 days.

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

Reliance Communications Limite  vs.  BAG Films and

Reliance Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

BAG Films

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAG Films and 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 essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Reliance Communications and BAG Films

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

The idea behind Reliance Communications Limited and BAG Films and 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.