Correlation Between Reliance Industries and Globus Spirits

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

Diversification Opportunities for Reliance Industries and Globus Spirits

0.34

Correlation Coefficient

Reliance Industries  Globus Spirits

Weak diversification

The 3 months correlation between Reliance and Globus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Globus Spirits Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globus Spirits 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 Globus Spirits. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globus Spirits has no effect on the direction of Reliance Industries i.e., Reliance Industries and Globus Spirits go up and down completely randomly.

Pair Corralation between Reliance Industries and Globus Spirits

Assuming the 90 days trading horizon Reliance Industries is expected to generate 4.13 times less return on investment than Globus Spirits. But when comparing it to its historical volatility, Reliance Industries Limited is 2.81 times less risky than Globus Spirits. It trades about 0.07 of its potential returns per unit of risk. Globus Spirits Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  86,890  in Globus Spirits Limited on December 28, 2024 and sell it today you would earn a total of  19,900  from holding Globus Spirits Limited or generate 22.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Reliance Industries Limited  vs.  Globus Spirits Limited

Reliance Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Industries Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Reliance Industries is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Globus Spirits

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Globus Spirits Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Globus Spirits unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and Globus Spirits

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

The idea behind Reliance Industries Limited and Globus Spirits 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.