Correlation Between Reliance Industries and Mitie Group

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

Diversification Opportunities for Reliance Industries and Mitie Group

-0.33

Correlation Coefficient

Reliance Industries  Mitie Group

Very good diversification

The 3 months correlation between Reliance and Mitie is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Reliance Industries i.e., Reliance Industries and Mitie Group go up and down completely randomly.

Pair Corralation between Reliance Industries and Mitie Group

Assuming the 90 days trading horizon Reliance Industries is expected to generate 1.41 times less return on investment than Mitie Group. In addition to that, Reliance Industries is 1.13 times more volatile than Mitie Group PLC. It trades about 0.05 of its total potential returns per unit of risk. Mitie Group PLC is currently generating about 0.08 per unit of volatility. If you would invest  11,000  in Mitie Group PLC on December 31, 2024 and sell it today you would earn a total of  620.00  from holding Mitie Group PLC or generate 5.64% return on investment over 90 days.

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

Reliance Industries Ltd  vs.  Mitie Group PLC

Reliance Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Industries Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Reliance Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mitie Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mitie Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Reliance Industries and Mitie Group

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

The idea behind Reliance Industries Ltd and Mitie Group PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.