Correlation Between Rico Auto and Industrial Investment

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

Diversification Opportunities for Rico Auto and Industrial Investment

-0.79

Correlation Coefficient

Rico Auto  Industrial Investment

Pay attention - limited upside

The 3 months correlation between Rico and Industrial is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment 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 Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Rico Auto i.e., Rico Auto and Industrial Investment go up and down completely randomly.

Pair Corralation between Rico Auto and Industrial Investment

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Industrial Investment. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.12 times less risky than Industrial Investment. The stock trades about -0.08 of its potential returns per unit of risk. The Industrial Investment Trust is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  32,200  in Industrial Investment Trust on August 31, 2024 and sell it today you would earn a total of  6,545  from holding Industrial Investment Trust or generate 20.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Rico Auto Industries  vs.  Industrial Investment Trust

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Industrial Investment

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rico Auto and Industrial Investment

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

The idea behind Rico Auto Industries and Industrial Investment Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.