Correlation Between Sarthak Metals and Reliance Power

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

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

Diversification Opportunities for Sarthak Metals and Reliance Power

0.65

Correlation Coefficient

Sarthak Metals  Reliance Power

Poor diversification

The 3 months correlation between Sarthak and Reliance is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Reliance Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Power and Sarthak Metals 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 Sarthak Metals Limited 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 Sarthak Metals i.e., Sarthak Metals and Reliance Power go up and down completely randomly.

Pair Corralation between Sarthak Metals and Reliance Power

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the Reliance Power. But the stock apears to be less risky and, when comparing its historical volatility, Sarthak Metals Limited is 1.17 times less risky than Reliance Power. The stock trades about -0.14 of its potential returns per unit of risk. The Reliance Power Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,413  in Reliance Power Limited on December 25, 2024 and sell it today you would lose (592.00) from holding Reliance Power Limited or give up 13.41% of portfolio value over 90 days.

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

Sarthak Metals Limited  vs.  Reliance Power Limited

Sarthak Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Reliance Power

Risk-Adjusted Performance

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 uncertain 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 Sarthak Metals and Reliance Power

The main advantage of trading using opposite Sarthak Metals and Reliance Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarthak Metals 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 Sarthak Metals Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.