Correlation Between Rico Auto and Gujarat Lease

Can any of the company-specific risk be diversified away by investing in both Rico Auto and Gujarat Lease 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 Gujarat Lease 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 Gujarat Lease Financing, you can compare the effects of market volatilities on Rico Auto and Gujarat Lease 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 Gujarat Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Gujarat Lease.

Diversification Opportunities for Rico Auto and Gujarat Lease

-0.21

Correlation Coefficient

Rico Auto  Gujarat Lease

Very good diversification

The 3 months correlation between Rico and Gujarat is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing 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 Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Rico Auto i.e., Rico Auto and Gujarat Lease go up and down completely randomly.

Pair Corralation between Rico Auto and Gujarat Lease

Assuming the 90 days trading horizon Rico Auto is expected to generate 3.57 times less return on investment than Gujarat Lease. In addition to that, Rico Auto is 1.09 times more volatile than Gujarat Lease Financing. It trades about 0.02 of its total potential returns per unit of risk. Gujarat Lease Financing is currently generating about 0.08 per unit of volatility. If you would invest  290.00  in Gujarat Lease Financing on September 26, 2024 and sell it today you would earn a total of  459.00  from holding Gujarat Lease Financing or generate 158.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Rico Auto Industries  vs.  Gujarat Lease Financing

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gujarat Lease Financing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rico Auto and Gujarat Lease

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

The idea behind Rico Auto Industries and Gujarat Lease Financing 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.