Correlation Between Rico Auto and Taj GVK

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

Diversification Opportunities for Rico Auto and Taj GVK

-0.46

Correlation Coefficient

Rico Auto  Taj GVK

Very good diversification

The 3 months correlation between Rico and Taj is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Taj GVK Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taj GVK Hotels 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 Taj GVK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taj GVK Hotels has no effect on the direction of Rico Auto i.e., Rico Auto and Taj GVK go up and down completely randomly.

Pair Corralation between Rico Auto and Taj GVK

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Taj GVK. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.69 times less risky than Taj GVK. The stock trades about -0.07 of its potential returns per unit of risk. The Taj GVK Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  33,910  in Taj GVK Hotels on September 26, 2024 and sell it today you would earn a total of  1,470  from holding Taj GVK Hotels or generate 4.34% return on investment over 90 days.

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

Rico Auto Industries  vs.  Taj GVK Hotels

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.

Taj GVK Hotels

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rico Auto and Taj GVK

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

The idea behind Rico Auto Industries and Taj GVK Hotels 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.