Correlation Between Reliance Industries and Sarthak Metals

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

Diversification Opportunities for Reliance Industries and Sarthak Metals

0.38

Correlation Coefficient

Reliance Industries  Sarthak Metals

Weak diversification

The 3 months correlation between Reliance and Sarthak is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals 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 Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Reliance Industries i.e., Reliance Industries and Sarthak Metals go up and down completely randomly.

Pair Corralation between Reliance Industries and Sarthak Metals

Assuming the 90 days trading horizon Reliance Industries Limited is expected to under-perform the Sarthak Metals. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Limited is 2.91 times less risky than Sarthak Metals. The stock trades about -0.17 of its potential returns per unit of risk. The Sarthak Metals Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  17,496  in Sarthak Metals Limited on September 3, 2024 and sell it today you would lose (1,783) from holding Sarthak Metals Limited or give up 10.19% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  Sarthak Metals 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 unsteady 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.

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Reliance Industries and Sarthak Metals

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

The idea behind Reliance Industries Limited and Sarthak Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.