Correlation Between Rico Auto and Credo Brands

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

Diversification Opportunities for Rico Auto and Credo Brands

0.67

Correlation Coefficient

Rico Auto  Credo Brands

Poor diversification

The 3 months correlation between Rico and Credo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Credo Brands Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Brands Marketing 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 Credo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Brands Marketing has no effect on the direction of Rico Auto i.e., Rico Auto and Credo Brands go up and down completely randomly.

Pair Corralation between Rico Auto and Credo Brands

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Credo Brands. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.93 times less risky than Credo Brands. The stock trades about -0.07 of its potential returns per unit of risk. The Credo Brands Marketing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16,747  in Credo Brands Marketing on September 25, 2024 and sell it today you would earn a total of  1,207  from holding Credo Brands Marketing or generate 7.21% return on investment over 90 days.

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

Rico Auto Industries  vs.  Credo Brands Marketing

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 weak 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.

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rico Auto and Credo Brands

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

The idea behind Rico Auto Industries and Credo Brands Marketing 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.