Correlation Between Reliance Weaving and Shifa International

Can any of the company-specific risk be diversified away by investing in both Reliance Weaving and Shifa International 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 Weaving and Shifa International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reliance Weaving Mills and Shifa International Hospitals, you can compare the effects of market volatilities on Reliance Weaving and Shifa International 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 Weaving with a short position of Shifa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Weaving and Shifa International.

Diversification Opportunities for Reliance Weaving and Shifa International

0.45

Correlation Coefficient

Reliance Weaving  Shifa International

Very weak diversification

The 3 months correlation between Reliance and Shifa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Weaving Mills and Shifa International Hospitals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shifa International and Reliance Weaving 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 Weaving Mills are associated (or correlated) with Shifa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shifa International has no effect on the direction of Reliance Weaving i.e., Reliance Weaving and Shifa International go up and down completely randomly.

Pair Corralation between Reliance Weaving and Shifa International

Assuming the 90 days trading horizon Reliance Weaving Mills is expected to under-perform the Shifa International. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Weaving Mills is 1.78 times less risky than Shifa International. The stock trades about 0.0 of its potential returns per unit of risk. The Shifa International Hospitals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  36,200  in Shifa International Hospitals on December 26, 2024 and sell it today you would earn a total of  10,394  from holding Shifa International Hospitals or generate 28.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.35%
Values	Daily Returns

Reliance Weaving Mills  vs.  Shifa International Hospitals

Reliance Weaving Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Weaving Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reliance Weaving is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shifa International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shifa International Hospitals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shifa International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Weaving and Shifa International

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

The idea behind Reliance Weaving Mills and Shifa International Hospitals 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.