Correlation Between Rico Auto and IDBI Bank

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

Diversification Opportunities for Rico Auto and IDBI Bank

0.49

Correlation Coefficient

Rico Auto  IDBI Bank

Very weak diversification

The 3 months correlation between Rico and IDBI is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and IDBI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDBI Bank 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 IDBI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDBI Bank Limited has no effect on the direction of Rico Auto i.e., Rico Auto and IDBI Bank go up and down completely randomly.

Pair Corralation between Rico Auto and IDBI Bank

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the IDBI Bank. In addition to that, Rico Auto is 1.16 times more volatile than IDBI Bank Limited. It trades about -0.1 of its total potential returns per unit of risk. IDBI Bank Limited is currently generating about 0.03 per unit of volatility. If you would invest  7,590  in IDBI Bank Limited on December 30, 2024 and sell it today you would earn a total of  180.00  from holding IDBI Bank Limited or generate 2.37% 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.  IDBI Bank Limited

Rico Auto Industries

Risk-Adjusted Performance

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

IDBI Bank Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IDBI Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IDBI Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rico Auto and IDBI Bank

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

The idea behind Rico Auto Industries and IDBI Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.