Correlation Between Guaranty Trust and Reliance Industries

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

By analyzing existing cross correlation between Guaranty Trust Holding and Reliance Industries Ltd, you can compare the effects of market volatilities on Guaranty Trust and Reliance Industries 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 Guaranty Trust with a short position of Reliance Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guaranty Trust and Reliance Industries.

Diversification Opportunities for Guaranty Trust and Reliance Industries

-0.5

Correlation Coefficient

Guaranty Trust  Reliance Industries

Very good diversification

The 3 months correlation between Guaranty and Reliance is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Guaranty Trust Holding and Reliance Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Guaranty Trust 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 Guaranty Trust Holding are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Guaranty Trust i.e., Guaranty Trust and Reliance Industries go up and down completely randomly.

Pair Corralation between Guaranty Trust and Reliance Industries

Assuming the 90 days trading horizon Guaranty Trust Holding is expected to generate 1.52 times more return on investment than Reliance Industries. However, Guaranty Trust is 1.52 times more volatile than Reliance Industries Ltd. It trades about 0.03 of its potential returns per unit of risk. Reliance Industries Ltd is currently generating about -0.26 per unit of risk. If you would invest  175.00  in Guaranty Trust Holding on September 25, 2024 and sell it today you would earn a total of  4.00  from holding Guaranty Trust Holding or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Guaranty Trust Holding  vs.  Reliance Industries Ltd

Guaranty Trust Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Guaranty Trust is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Guaranty Trust and Reliance Industries

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

The idea behind Guaranty Trust Holding and Reliance Industries Ltd 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.