Correlation Between Ratnamani Metals and Trent

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

By analyzing existing cross correlation between Ratnamani Metals Tubes and Trent Limited, you can compare the effects of market volatilities on Ratnamani Metals and Trent 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 Ratnamani Metals with a short position of Trent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ratnamani Metals and Trent.

Diversification Opportunities for Ratnamani Metals and Trent

0.33

Correlation Coefficient

Ratnamani Metals  Trent

Weak diversification

The 3 months correlation between Ratnamani and Trent is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ratnamani Metals Tubes and Trent Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trent Limited and Ratnamani Metals 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 Ratnamani Metals Tubes are associated (or correlated) with Trent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trent Limited has no effect on the direction of Ratnamani Metals i.e., Ratnamani Metals and Trent go up and down completely randomly.

Pair Corralation between Ratnamani Metals and Trent

Assuming the 90 days trading horizon Ratnamani Metals is expected to generate 2.64 times less return on investment than Trent. But when comparing it to its historical volatility, Ratnamani Metals Tubes is 1.05 times less risky than Trent. It trades about 0.07 of its potential returns per unit of risk. Trent Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  135,458  in Trent Limited on September 14, 2024 and sell it today you would earn a total of  565,792  from holding Trent Limited or generate 417.69% return on investment over 90 days.

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

Ratnamani Metals Tubes  vs.  Trent Limited

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Trent is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ratnamani Metals and Trent

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

The idea behind Ratnamani Metals Tubes and Trent 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.