Correlation Between Reliance Industries and Ratnamani Metals

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

Diversification Opportunities for Reliance Industries and Ratnamani Metals

0.48

Correlation Coefficient

Reliance Industries  Ratnamani Metals

Very weak diversification

The 3 months correlation between Reliance and Ratnamani is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes 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 Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of Reliance Industries i.e., Reliance Industries and Ratnamani Metals go up and down completely randomly.

Pair Corralation between Reliance Industries and Ratnamani Metals

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 0.8 times more return on investment than Ratnamani Metals. However, Reliance Industries Limited is 1.25 times less risky than Ratnamani Metals. It trades about -0.09 of its potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about -0.36 per unit of risk. If you would invest  129,220  in Reliance Industries Limited on November 29, 2024 and sell it today you would lose (8,820) from holding Reliance Industries Limited or give up 6.83% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  Ratnamani Metals Tubes

Reliance Industries

Risk-Adjusted Performance

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 unfluctuating 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.

Ratnamani Metals Tubes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Reliance Industries and Ratnamani Metals

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

The idea behind Reliance Industries Limited and Ratnamani Metals Tubes 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.