Correlation Between Shaily Engineering and Reliance Power

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

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

Diversification Opportunities for Shaily Engineering and Reliance Power

0.16

Correlation Coefficient

Shaily Engineering  Reliance Power

Average diversification

The 3 months correlation between Shaily and Reliance is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics and Reliance Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Power and Shaily Engineering 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 Shaily Engineering Plastics are associated (or correlated) with Reliance Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Power has no effect on the direction of Shaily Engineering i.e., Shaily Engineering and Reliance Power go up and down completely randomly.

Pair Corralation between Shaily Engineering and Reliance Power

Assuming the 90 days trading horizon Shaily Engineering Plastics is expected to generate 0.98 times more return on investment than Reliance Power. However, Shaily Engineering Plastics is 1.02 times less risky than Reliance Power. It trades about 0.21 of its potential returns per unit of risk. Reliance Power Limited is currently generating about 0.06 per unit of risk. If you would invest  31,977  in Shaily Engineering Plastics on October 9, 2024 and sell it today you would earn a total of  119,008  from holding Shaily Engineering Plastics or generate 372.17% return on investment over 90 days.

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

Shaily Engineering Plastics  vs.  Reliance Power Limited

Shaily Engineering

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Reliance Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shaily Engineering and Reliance Power

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

The idea behind Shaily Engineering Plastics and Reliance Power 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..