Correlation Between Reliance Industries and Capacite Infraprojects

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

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

Diversification Opportunities for Reliance Industries and Capacite Infraprojects

-0.11

Correlation Coefficient

Reliance Industries  Capacite Infraprojects

Good diversification

The 3 months correlation between Reliance and Capacite is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects and Reliance Industries 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 Industries Limited are associated (or correlated) with Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Reliance Industries i.e., Reliance Industries and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Reliance Industries and Capacite Infraprojects

Assuming the 90 days trading horizon Reliance Industries Limited is expected to under-perform the Capacite Infraprojects. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Limited is 2.18 times less risky than Capacite Infraprojects. The stock trades about -0.18 of its potential returns per unit of risk. The Capacite Infraprojects Limited is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  36,070  in Capacite Infraprojects Limited on September 23, 2024 and sell it today you would earn a total of  7,740  from holding Capacite Infraprojects Limited or generate 21.46% return on investment over 90 days.

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

Reliance Industries Limited  vs.  Capacite Infraprojects Limited

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Capacite Infraprojects

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Capacite Infraprojects unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and Capacite Infraprojects

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

The idea behind Reliance Industries Limited and Capacite Infraprojects 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.