Correlation Between Reliance Industrial and Capacite Infraprojects

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

By analyzing existing cross correlation between Reliance Industrial Infrastructure and Capacite Infraprojects Limited, you can compare the effects of market volatilities on Reliance Industrial and Capacite Infraprojects 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 Industrial with a short position of Capacite Infraprojects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industrial and Capacite Infraprojects.

Diversification Opportunities for Reliance Industrial and Capacite Infraprojects

0.29

Correlation Coefficient

Reliance Industrial  Capacite Infraprojects

Modest diversification

The 3 months correlation between Reliance and Capacite is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industrial Infrastruc and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects and Reliance Industrial 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 Industrial Infrastructure are associated (or correlated) with Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Reliance Industrial i.e., Reliance Industrial and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Reliance Industrial and Capacite Infraprojects

Assuming the 90 days trading horizon Reliance Industrial is expected to generate 3.45 times less return on investment than Capacite Infraprojects. In addition to that, Reliance Industrial is 1.05 times more volatile than Capacite Infraprojects Limited. It trades about 0.02 of its total potential returns per unit of risk. Capacite Infraprojects Limited is currently generating about 0.07 per unit of volatility. If you would invest  26,245  in Capacite Infraprojects Limited on October 11, 2024 and sell it today you would earn a total of  15,810  from holding Capacite Infraprojects Limited or generate 60.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.65%
Values	Daily Returns

Reliance Industrial Infrastruc  vs.  Capacite Infraprojects Limited

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Capacite Infraprojects

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Capacite Infraprojects may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Reliance Industrial and Capacite Infraprojects

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

The idea behind Reliance Industrial Infrastructure and Capacite Infraprojects 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.