Correlation Between Reliance Communications and GTL

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

Diversification Opportunities for Reliance Communications and GTL

0.62

Correlation Coefficient

Reliance Communications  GTL

Poor diversification

The 3 months correlation between Reliance and GTL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Communications Limite and GTL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GTL Limited 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 GTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GTL Limited has no effect on the direction of Reliance Communications i.e., Reliance Communications and GTL go up and down completely randomly.

Pair Corralation between Reliance Communications and GTL

Assuming the 90 days trading horizon Reliance Communications Limited is expected to generate 0.96 times more return on investment than GTL. However, Reliance Communications Limited is 1.04 times less risky than GTL. It trades about -0.19 of its potential returns per unit of risk. GTL Limited is currently generating about -0.23 per unit of risk. If you would invest  198.00  in Reliance Communications Limited on December 31, 2024 and sell it today you would lose (57.00) from holding Reliance Communications Limited or give up 28.79% 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.  GTL Limited

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GTL Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Reliance Communications and GTL

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

The idea behind Reliance Communications Limited and GTL 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.