Correlation Between Indian Metals and Rajnandini Metal

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

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

Diversification Opportunities for Indian Metals and Rajnandini Metal

-0.58

Correlation Coefficient

Indian Metals  Rajnandini Metal

Excellent diversification

The 3 months correlation between Indian and Rajnandini is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Indian 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 Indian Metals Ferro 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 Indian Metals i.e., Indian Metals and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Indian Metals and Rajnandini Metal

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.14 times more return on investment than Rajnandini Metal. However, Indian Metals is 1.14 times more volatile than Rajnandini Metal Limited. It trades about 0.19 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.12 per unit of risk. If you would invest  64,194  in Indian Metals Ferro on September 3, 2024 and sell it today you would earn a total of  20,021  from holding Indian Metals Ferro or generate 31.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Indian Metals Ferro  vs.  Rajnandini Metal Limited

Indian Metals Ferro

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Indian Metals and Rajnandini Metal

The main advantage of trading using opposite Indian Metals and Rajnandini Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals 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 Indian Metals Ferro 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.