Correlation Between Repco Home and Sandhar Technologies

Can any of the company-specific risk be diversified away by investing in both Repco Home and Sandhar Technologies 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 Repco Home and Sandhar Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Repco Home Finance and Sandhar Technologies Limited, you can compare the effects of market volatilities on Repco Home and Sandhar Technologies 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 Repco Home with a short position of Sandhar Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repco Home and Sandhar Technologies.

Diversification Opportunities for Repco Home and Sandhar Technologies

0.32

Correlation Coefficient

Repco Home  Sandhar Technologies

Weak diversification

The 3 months correlation between Repco and Sandhar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies and Repco Home 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 Repco Home Finance are associated (or correlated) with Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of Repco Home i.e., Repco Home and Sandhar Technologies go up and down completely randomly.

Pair Corralation between Repco Home and Sandhar Technologies

Assuming the 90 days trading horizon Repco Home Finance is expected to generate 1.33 times more return on investment than Sandhar Technologies. However, Repco Home is 1.33 times more volatile than Sandhar Technologies Limited. It trades about -0.18 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about -0.38 per unit of risk. If you would invest  47,465  in Repco Home Finance on October 8, 2024 and sell it today you would lose (3,885) from holding Repco Home Finance or give up 8.18% of portfolio value over 90 days.

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

Repco Home Finance  vs.  Sandhar Technologies Limited

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Repco Home and Sandhar Technologies

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

The idea behind Repco Home Finance and Sandhar Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.