Correlation Between Reliance Industries and Livermore Investments

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

Diversification Opportunities for Reliance Industries and Livermore Investments

-0.66

Correlation Coefficient

Reliance Industries  Livermore Investments

Excellent diversification

The 3 months correlation between Reliance and Livermore is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Livermore Investments Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livermore Investments 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 Livermore Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livermore Investments has no effect on the direction of Reliance Industries i.e., Reliance Industries and Livermore Investments go up and down completely randomly.

Pair Corralation between Reliance Industries and Livermore Investments

Assuming the 90 days trading horizon Reliance Industries is expected to generate 3.28 times less return on investment than Livermore Investments. But when comparing it to its historical volatility, Reliance Industries Ltd is 3.88 times less risky than Livermore Investments. It trades about 0.24 of its potential returns per unit of risk. Livermore Investments Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,650  in Livermore Investments Group on October 22, 2024 and sell it today you would earn a total of  725.00  from holding Livermore Investments Group or generate 15.59% return on investment over 90 days.

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

Reliance Industries Ltd  vs.  Livermore Investments Group

Reliance Industries

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Reliance Industries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Livermore Investments

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and Livermore Investments

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

The idea behind Reliance Industries Ltd and Livermore Investments Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.