Correlation Between Speciality Restaurants and Rajnandini Metal

Can any of the company-specific risk be diversified away by investing in both Speciality Restaurants and Rajnandini Metal 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 Speciality Restaurants and Rajnandini Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Speciality Restaurants and Rajnandini Metal

0.86

Correlation Coefficient

Speciality Restaurants  Rajnandini Metal

Very poor diversification

The 3 months correlation between Speciality and Rajnandini is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with Rajnandini Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rajnandini Metal has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Speciality Restaurants and Rajnandini Metal

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the Rajnandini Metal. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.3 times less risky than Rajnandini Metal. The stock trades about -0.02 of its potential returns per unit of risk. The Rajnandini Metal Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,075  in Rajnandini Metal Limited on September 1, 2024 and sell it today you would lose (62.00) from holding Rajnandini Metal Limited or give up 5.77% of portfolio value over 90 days.

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

Speciality Restaurants Limited  vs.  Rajnandini Metal Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Speciality Restaurants and Rajnandini Metal

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

The idea behind Speciality Restaurants Limited and Rajnandini Metal 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.