Correlation Between Rico Auto and Aban Offshore

Can any of the company-specific risk be diversified away by investing in both Rico Auto and Aban Offshore 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 Rico Auto and Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rico Auto Industries and Aban Offshore Limited, you can compare the effects of market volatilities on Rico Auto and Aban Offshore 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 Rico Auto with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Aban Offshore.

Diversification Opportunities for Rico Auto and Aban Offshore

0.52

Correlation Coefficient

Rico Auto  Aban Offshore

Very weak diversification

The 3 months correlation between Rico and Aban is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and Rico Auto 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 Rico Auto Industries are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Rico Auto i.e., Rico Auto and Aban Offshore go up and down completely randomly.

Pair Corralation between Rico Auto and Aban Offshore

Assuming the 90 days trading horizon Rico Auto Industries is expected to generate 1.9 times more return on investment than Aban Offshore. However, Rico Auto is 1.9 times more volatile than Aban Offshore Limited. It trades about 0.06 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.15 per unit of risk. If you would invest  8,527  in Rico Auto Industries on October 24, 2024 and sell it today you would earn a total of  342.00  from holding Rico Auto Industries or generate 4.01% return on investment over 90 days.

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

Rico Auto Industries  vs.  Aban Offshore Limited

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rico Auto is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting 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 Rico Auto and Aban Offshore

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

The idea behind Rico Auto Industries and Aban Offshore 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..