Correlation Between Radico Khaitan and Gangotri Textiles

Can any of the company-specific risk be diversified away by investing in both Radico Khaitan and Gangotri Textiles 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 Gangotri Textiles 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 Gangotri Textiles Limited, you can compare the effects of market volatilities on Radico Khaitan and Gangotri Textiles 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 Gangotri Textiles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radico Khaitan and Gangotri Textiles.

Diversification Opportunities for Radico Khaitan and Gangotri Textiles

-0.75

Correlation Coefficient

Radico Khaitan  Gangotri Textiles

Pay attention - limited upside

The 3 months correlation between Radico and Gangotri is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Radico Khaitan Limited and Gangotri Textiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gangotri Textiles 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 Gangotri Textiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gangotri Textiles has no effect on the direction of Radico Khaitan i.e., Radico Khaitan and Gangotri Textiles go up and down completely randomly.

Pair Corralation between Radico Khaitan and Gangotri Textiles

Assuming the 90 days trading horizon Radico Khaitan Limited is expected to generate 1.13 times more return on investment than Gangotri Textiles. However, Radico Khaitan is 1.13 times more volatile than Gangotri Textiles Limited. It trades about 0.14 of its potential returns per unit of risk. Gangotri Textiles Limited is currently generating about -0.09 per unit of risk. If you would invest  200,000  in Radico Khaitan Limited on September 5, 2024 and sell it today you would earn a total of  38,455  from holding Radico Khaitan Limited or generate 19.23% return on investment over 90 days.

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

Radico Khaitan Limited  vs.  Gangotri Textiles Limited

Radico Khaitan

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 10 (%) 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.

Gangotri Textiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gangotri Textiles Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Radico Khaitan and Gangotri Textiles

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

The idea behind Radico Khaitan Limited and Gangotri Textiles 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.