Correlation Between Reliance Industries and PTC INDUSTRIES

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

Diversification Opportunities for Reliance Industries and PTC INDUSTRIES

0.86

Correlation Coefficient

Reliance Industries  PTC INDUSTRIES

Very poor diversification

The 3 months correlation between Reliance and PTC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and PTC INDUSTRIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC INDUSTRIES LTD 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 PTC INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC INDUSTRIES LTD has no effect on the direction of Reliance Industries i.e., Reliance Industries and PTC INDUSTRIES go up and down completely randomly.

Pair Corralation between Reliance Industries and PTC INDUSTRIES

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 0.69 times more return on investment than PTC INDUSTRIES. However, Reliance Industries Limited is 1.44 times less risky than PTC INDUSTRIES. It trades about -0.17 of its potential returns per unit of risk. PTC INDUSTRIES LTD is currently generating about -0.19 per unit of risk. If you would invest  147,218  in Reliance Industries Limited on September 15, 2024 and sell it today you would lose (19,933) from holding Reliance Industries Limited or give up 13.54% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  PTC INDUSTRIES LTD

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.

PTC INDUSTRIES LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTC INDUSTRIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Reliance Industries and PTC INDUSTRIES

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

The idea behind Reliance Industries Limited and PTC INDUSTRIES LTD 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 Transaction History module to view history of all your transactions and understand their impact on performance.