Correlation Between Renuka Agri and E M

Can any of the company-specific risk be diversified away by investing in both Renuka Agri and E M 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 Renuka Agri and E M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Renuka Agri Foods and E M L, you can compare the effects of market volatilities on Renuka Agri and E M 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 Renuka Agri with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renuka Agri and E M.

Diversification Opportunities for Renuka Agri and E M

0.73

Correlation Coefficient

Renuka Agri  E M

Poor diversification

The 3 months correlation between Renuka and EMLN0000 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Renuka Agri Foods and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and Renuka Agri 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 Renuka Agri Foods are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of Renuka Agri i.e., Renuka Agri and E M go up and down completely randomly.

Pair Corralation between Renuka Agri and E M

Assuming the 90 days trading horizon Renuka Agri is expected to generate 1.33 times less return on investment than E M. But when comparing it to its historical volatility, Renuka Agri Foods is 1.52 times less risky than E M. It trades about 0.13 of its potential returns per unit of risk. E M L is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  300.00  in E M L on September 15, 2024 and sell it today you would earn a total of  90.00  from holding E M L or generate 30.0% return on investment over 90 days.

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

Renuka Agri Foods  vs.  E M L

Renuka Agri Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renuka Agri Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renuka Agri sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renuka Agri and E M

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

The idea behind Renuka Agri Foods and E M L 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.