Correlation Between Tree House and Rajnandini Metal

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

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

Diversification Opportunities for Tree House and Rajnandini Metal

-0.04

Correlation Coefficient

Tree House  Rajnandini Metal

Good diversification

The 3 months correlation between Tree and Rajnandini is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Tree House Education and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Tree House 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 Tree House Education 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 Tree House i.e., Tree House and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Tree House and Rajnandini Metal

Assuming the 90 days trading horizon Tree House Education is expected to generate 1.09 times more return on investment than Rajnandini Metal. However, Tree House is 1.09 times more volatile than Rajnandini Metal Limited. It trades about -0.03 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.07 per unit of risk. If you would invest  2,305  in Tree House Education on October 9, 2024 and sell it today you would lose (649.00) from holding Tree House Education or give up 28.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Tree House Education  vs.  Rajnandini Metal Limited

Tree House Education

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tree House Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Tree House is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 uncertain performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tree House and Rajnandini Metal

The main advantage of trading using opposite Tree House and Rajnandini Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree House 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 Tree House Education 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 CEOs Directory module to screen CEOs from public companies around the world.