Correlation Between Rico Auto and Sandhar Technologies

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

Diversification Opportunities for Rico Auto and Sandhar Technologies

0.21

Correlation Coefficient

Rico Auto  Sandhar Technologies

Modest diversification

The 3 months correlation between Rico and Sandhar is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar 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 Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of Rico Auto i.e., Rico Auto and Sandhar Technologies go up and down completely randomly.

Pair Corralation between Rico Auto and Sandhar Technologies

Assuming the 90 days trading horizon Rico Auto Industries is expected to generate 1.54 times more return on investment than Sandhar Technologies. However, Rico Auto is 1.54 times more volatile than Sandhar Technologies Limited. It trades about -0.01 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about -0.05 per unit of risk. If you would invest  9,410  in Rico Auto Industries on October 24, 2024 and sell it today you would lose (541.00) from holding Rico Auto Industries or give up 5.75% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  Sandhar 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.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Rico Auto and Sandhar Technologies

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

The idea behind Rico Auto Industries and Sandhar 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.