Correlation Between Fine Organic and Rico Auto

Can any of the company-specific risk be diversified away by investing in both Fine Organic and Rico Auto 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 Fine Organic and Rico Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fine Organic Industries and Rico Auto Industries, you can compare the effects of market volatilities on Fine Organic and Rico Auto 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 Fine Organic with a short position of Rico Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Organic and Rico Auto.

Diversification Opportunities for Fine Organic and Rico Auto

0.69

Correlation Coefficient

Fine Organic  Rico Auto

Poor diversification

The 3 months correlation between Fine and Rico is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries and Fine Organic 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 Fine Organic Industries are associated (or correlated) with Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of Fine Organic i.e., Fine Organic and Rico Auto go up and down completely randomly.

Pair Corralation between Fine Organic and Rico Auto

Assuming the 90 days trading horizon Fine Organic is expected to generate 1.1 times less return on investment than Rico Auto. In addition to that, Fine Organic is 1.64 times more volatile than Rico Auto Industries. It trades about 0.12 of its total potential returns per unit of risk. Rico Auto Industries is currently generating about 0.22 per unit of volatility. If you would invest  8,537  in Rico Auto Industries on September 16, 2024 and sell it today you would earn a total of  589.00  from holding Rico Auto Industries or generate 6.9% return on investment over 90 days.

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

Fine Organic Industries  vs.  Rico Auto Industries

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fine Organic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fine Organic and Rico Auto

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

The idea behind Fine Organic Industries and Rico Auto Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.