Correlation Between Rico Auto and Investment Trust

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

Diversification Opportunities for Rico Auto and Investment Trust

-0.03

Correlation Coefficient

Rico Auto  Investment Trust

Good diversification

The 3 months correlation between Rico and Investment is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of Rico Auto i.e., Rico Auto and Investment Trust go up and down completely randomly.

Pair Corralation between Rico Auto and Investment Trust

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Investment Trust. In addition to that, Rico Auto is 1.32 times more volatile than The Investment Trust. It trades about -0.02 of its total potential returns per unit of risk. The Investment Trust is currently generating about 0.01 per unit of volatility. If you would invest  19,542  in The Investment Trust on October 6, 2024 and sell it today you would lose (212.00) from holding The Investment Trust or give up 1.08% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  The Investment Trust

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.

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment Trust 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 Investment Trust

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

The idea behind Rico Auto Industries and The Investment Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.