Correlation Between Roshan Packages and Reliance Insurance

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

By analyzing existing cross correlation between Roshan Packages and Reliance Insurance Co, you can compare the effects of market volatilities on Roshan Packages and Reliance Insurance 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 Roshan Packages with a short position of Reliance Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roshan Packages and Reliance Insurance.

Diversification Opportunities for Roshan Packages and Reliance Insurance

0.32

Correlation Coefficient

Roshan Packages  Reliance Insurance

Weak diversification

The 3 months correlation between Roshan and Reliance is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Roshan Packages and Reliance Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Insurance and Roshan Packages 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 Roshan Packages are associated (or correlated) with Reliance Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Insurance has no effect on the direction of Roshan Packages i.e., Roshan Packages and Reliance Insurance go up and down completely randomly.

Pair Corralation between Roshan Packages and Reliance Insurance

Assuming the 90 days trading horizon Roshan Packages is expected to under-perform the Reliance Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Roshan Packages is 1.87 times less risky than Reliance Insurance. The stock trades about -0.11 of its potential returns per unit of risk. The Reliance Insurance Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,197  in Reliance Insurance Co on December 23, 2024 and sell it today you would earn a total of  53.00  from holding Reliance Insurance Co or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.3%
Values	Daily Returns

Roshan Packages  vs.  Reliance Insurance Co

Roshan Packages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roshan Packages has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Reliance Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Insurance Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Reliance Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Roshan Packages and Reliance Insurance

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

The idea behind Roshan Packages and Reliance Insurance Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.