Correlation Between Rajnandini Metal and United Drilling

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

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

Diversification Opportunities for Rajnandini Metal and United Drilling

0.81

Correlation Coefficient

Rajnandini Metal  United Drilling

Very poor diversification

The 3 months correlation between Rajnandini and United is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited and United Drilling Tools in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Drilling Tools and Rajnandini Metal 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 Rajnandini Metal Limited are associated (or correlated) with United Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Drilling Tools has no effect on the direction of Rajnandini Metal i.e., Rajnandini Metal and United Drilling go up and down completely randomly.

Pair Corralation between Rajnandini Metal and United Drilling

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the United Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Rajnandini Metal Limited is 1.06 times less risky than United Drilling. The stock trades about -0.12 of its potential returns per unit of risk. The United Drilling Tools is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  27,305  in United Drilling Tools on September 5, 2024 and sell it today you would lose (2,395) from holding United Drilling Tools or give up 8.77% of portfolio value over 90 days.

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

Rajnandini Metal Limited  vs.  United Drilling Tools

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.

United Drilling Tools

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Drilling Tools has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Rajnandini Metal and United Drilling

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

The idea behind Rajnandini Metal Limited and United Drilling Tools 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.