Correlation Between Rico Auto and Power Finance

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

Diversification Opportunities for Rico Auto and Power Finance

0.23

Correlation Coefficient

Rico Auto  Power Finance

Modest diversification

The 3 months correlation between Rico and Power is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Rico Auto i.e., Rico Auto and Power Finance go up and down completely randomly.

Pair Corralation between Rico Auto and Power Finance

Assuming the 90 days trading horizon Rico Auto is expected to generate 4.47 times less return on investment than Power Finance. But when comparing it to its historical volatility, Rico Auto Industries is 1.13 times less risky than Power Finance. It trades about 0.03 of its potential returns per unit of risk. Power Finance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,919  in Power Finance on September 14, 2024 and sell it today you would earn a total of  40,856  from holding Power Finance or generate 411.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

Rico Auto Industries  vs.  Power Finance

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 unsteady 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.

Power Finance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rico Auto and Power Finance

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

The idea behind Rico Auto Industries and Power Finance 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.