Correlation Between Radico Khaitan and Allied Blenders

Can any of the company-specific risk be diversified away by investing in both Radico Khaitan and Allied Blenders 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 Radico Khaitan and Allied Blenders into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Radico Khaitan Limited and Allied Blenders Distillers, you can compare the effects of market volatilities on Radico Khaitan and Allied Blenders 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 Radico Khaitan with a short position of Allied Blenders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radico Khaitan and Allied Blenders.

Diversification Opportunities for Radico Khaitan and Allied Blenders

-0.15

Correlation Coefficient

Radico Khaitan  Allied Blenders

Good diversification

The 3 months correlation between Radico and Allied is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Radico Khaitan Limited and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and Radico Khaitan 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 Radico Khaitan Limited are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of Radico Khaitan i.e., Radico Khaitan and Allied Blenders go up and down completely randomly.

Pair Corralation between Radico Khaitan and Allied Blenders

Assuming the 90 days trading horizon Radico Khaitan Limited is expected to generate 0.91 times more return on investment than Allied Blenders. However, Radico Khaitan Limited is 1.1 times less risky than Allied Blenders. It trades about 0.15 of its potential returns per unit of risk. Allied Blenders Distillers is currently generating about 0.05 per unit of risk. If you would invest  201,500  in Radico Khaitan Limited on September 12, 2024 and sell it today you would earn a total of  41,085  from holding Radico Khaitan Limited or generate 20.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Radico Khaitan Limited  vs.  Allied Blenders Distillers

Radico Khaitan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Radico Khaitan sustained solid returns over the last few months and may actually be approaching a breakup point.

Allied Blenders Dist

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Allied Blenders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Radico Khaitan and Allied Blenders

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

The idea behind Radico Khaitan Limited and Allied Blenders Distillers 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.