Correlation Between Rico Auto and Thermax

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

Diversification Opportunities for Rico Auto and Thermax

0.43

Correlation Coefficient

Rico Auto  Thermax

Very weak diversification

The 3 months correlation between Rico and Thermax is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax Limited 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 Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of Rico Auto i.e., Rico Auto and Thermax go up and down completely randomly.

Pair Corralation between Rico Auto and Thermax

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Thermax. In addition to that, Rico Auto is 1.01 times more volatile than Thermax Limited. It trades about -0.16 of its total potential returns per unit of risk. Thermax Limited is currently generating about -0.03 per unit of volatility. If you would invest  520,700  in Thermax Limited on September 18, 2024 and sell it today you would lose (30,215) from holding Thermax Limited or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Rico Auto Industries  vs.  Thermax 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 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.

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rico Auto and Thermax

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

The idea behind Rico Auto Industries and Thermax 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.