Correlation Between Raj Rayon and Zuari Agro

Can any of the company-specific risk be diversified away by investing in both Raj Rayon and Zuari Agro 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 Raj Rayon and Zuari Agro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Raj Rayon Industries and Zuari Agro Chemicals, you can compare the effects of market volatilities on Raj Rayon and Zuari Agro 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 Raj Rayon with a short position of Zuari Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raj Rayon and Zuari Agro.

Diversification Opportunities for Raj Rayon and Zuari Agro

-0.15

Correlation Coefficient

Raj Rayon  Zuari Agro

Good diversification

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

Pair Corralation between Raj Rayon and Zuari Agro

Assuming the 90 days trading horizon Raj Rayon is expected to generate 3.82 times less return on investment than Zuari Agro. But when comparing it to its historical volatility, Raj Rayon Industries is 1.86 times less risky than Zuari Agro. It trades about 0.03 of its potential returns per unit of risk. Zuari Agro Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,255  in Zuari Agro Chemicals on September 13, 2024 and sell it today you would earn a total of  6,906  from holding Zuari Agro Chemicals or generate 37.83% return on investment over 90 days.

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

Raj Rayon Industries  vs.  Zuari Agro Chemicals

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Raj Rayon is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Zuari Agro Chemicals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Zuari Agro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raj Rayon and Zuari Agro

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

The idea behind Raj Rayon Industries and Zuari Agro Chemicals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.