Correlation Between Reliance Industries and Fresenius Medical

Can any of the company-specific risk be diversified away by investing in both Reliance Industries and Fresenius Medical 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 Reliance Industries and Fresenius Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reliance Industries Ltd and Fresenius Medical Care, you can compare the effects of market volatilities on Reliance Industries and Fresenius Medical 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 Reliance Industries with a short position of Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and Fresenius Medical.

Diversification Opportunities for Reliance Industries and Fresenius Medical

0.13

Correlation Coefficient

Reliance Industries  Fresenius Medical

Average diversification

The 3 months correlation between Reliance and Fresenius is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and Reliance Industries 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 Reliance Industries Ltd are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Reliance Industries i.e., Reliance Industries and Fresenius Medical go up and down completely randomly.

Pair Corralation between Reliance Industries and Fresenius Medical

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to generate 0.77 times more return on investment than Fresenius Medical. However, Reliance Industries Ltd is 1.3 times less risky than Fresenius Medical. It trades about -0.04 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about -0.14 per unit of risk. If you would invest  5,770  in Reliance Industries Ltd on December 9, 2024 and sell it today you would lose (80.00) from holding Reliance Industries Ltd or give up 1.39% of portfolio value over 90 days.

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

Reliance Industries Ltd  vs.  Fresenius Medical Care

Reliance Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fresenius Medical Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fresenius Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Reliance Industries and Fresenius Medical

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

The idea behind Reliance Industries Ltd and Fresenius Medical Care 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.