Correlation Between Rico Auto and State Trading

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

Diversification Opportunities for Rico Auto and State Trading

0.79

Correlation Coefficient

Rico Auto  State Trading

Poor diversification

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

Pair Corralation between Rico Auto and State Trading

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the State Trading. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.62 times less risky than State Trading. The stock trades about -0.16 of its potential returns per unit of risk. The The State Trading is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  18,635  in The State Trading on September 15, 2024 and sell it today you would lose (1,610) from holding The State Trading or give up 8.64% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  The State Trading

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 uncertain 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.

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Rico Auto and State Trading

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

The idea behind Rico Auto Industries and The State Trading 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.