Correlation Between Reliance Communications and Blue Jet

Can any of the company-specific risk be diversified away by investing in both Reliance Communications and Blue Jet 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 Blue Jet 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 Blue Jet Healthcare, you can compare the effects of market volatilities on Reliance Communications and Blue Jet 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 Blue Jet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Communications and Blue Jet.

Diversification Opportunities for Reliance Communications and Blue Jet

-0.48

Correlation Coefficient

Reliance Communications  Blue Jet

Very good diversification

The 3 months correlation between Reliance and Blue is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Communications Limite and Blue Jet Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Jet Healthcare 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 Blue Jet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Jet Healthcare has no effect on the direction of Reliance Communications i.e., Reliance Communications and Blue Jet go up and down completely randomly.

Pair Corralation between Reliance Communications and Blue Jet

Assuming the 90 days trading horizon Reliance Communications is expected to generate 42.33 times less return on investment than Blue Jet. But when comparing it to its historical volatility, Reliance Communications Limited is 1.12 times less risky than Blue Jet. It trades about 0.01 of its potential returns per unit of risk. Blue Jet Healthcare is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  51,940  in Blue Jet Healthcare on November 29, 2024 and sell it today you would earn a total of  27,825  from holding Blue Jet Healthcare or generate 53.57% return on investment over 90 days.

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

Reliance Communications Limite  vs.  Blue Jet Healthcare

Reliance Communications

Risk-Adjusted Performance

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 comparatively stable basic indicators, Reliance Communications is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Blue Jet Healthcare

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Jet Healthcare are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, Blue Jet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Communications and Blue Jet

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

The idea behind Reliance Communications Limited and Blue Jet Healthcare 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.