Correlation Between Rico Auto and Goldstone Technologies

Can any of the company-specific risk be diversified away by investing in both Rico Auto and Goldstone 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 Rico Auto and Goldstone Technologies 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 Goldstone Technologies Limited, you can compare the effects of market volatilities on Rico Auto and Goldstone 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 Rico Auto with a short position of Goldstone Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Goldstone Technologies.

Diversification Opportunities for Rico Auto and Goldstone Technologies

0.53

Correlation Coefficient

Rico Auto  Goldstone Technologies

Very weak diversification

The 3 months correlation between Rico and Goldstone is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Goldstone Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldstone Technologies 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 Goldstone Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldstone Technologies has no effect on the direction of Rico Auto i.e., Rico Auto and Goldstone Technologies go up and down completely randomly.

Pair Corralation between Rico Auto and Goldstone Technologies

Assuming the 90 days trading horizon Rico Auto is expected to generate 1.25 times less return on investment than Goldstone Technologies. In addition to that, Rico Auto is 1.81 times more volatile than Goldstone Technologies Limited. It trades about 0.05 of its total potential returns per unit of risk. Goldstone Technologies Limited is currently generating about 0.12 per unit of volatility. If you would invest  7,336  in Goldstone Technologies Limited on October 6, 2024 and sell it today you would earn a total of  418.00  from holding Goldstone Technologies Limited or generate 5.7% 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.  Goldstone Technologies 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.

Goldstone Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldstone Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rico Auto and Goldstone Technologies

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

The idea behind Rico Auto Industries and Goldstone 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.