Correlation Between Reliance Industries and Emkay Global

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

Diversification Opportunities for Reliance Industries and Emkay Global

-0.75

Correlation Coefficient

Reliance Industries  Emkay Global

Pay attention - limited upside

The 3 months correlation between Reliance and Emkay is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Emkay Global Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emkay Global Financial 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 Emkay Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emkay Global Financial has no effect on the direction of Reliance Industries i.e., Reliance Industries and Emkay Global go up and down completely randomly.

Pair Corralation between Reliance Industries and Emkay Global

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 0.71 times more return on investment than Emkay Global. However, Reliance Industries Limited is 1.41 times less risky than Emkay Global. It trades about -0.24 of its potential returns per unit of risk. Emkay Global Financial is currently generating about -0.46 per unit of risk. If you would invest  132,205  in Reliance Industries Limited on October 6, 2024 and sell it today you would lose (7,090) from holding Reliance Industries Limited or give up 5.36% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  Emkay Global Financial

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Emkay Global Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emkay Global Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Emkay Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and Emkay Global

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

The idea behind Reliance Industries Limited and Emkay Global Financial 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.