Correlation Between REC and Imagicaaworld Entertainment

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

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

Diversification Opportunities for REC and Imagicaaworld Entertainment

0.88

Correlation Coefficient

REC  Imagicaaworld Entertainment

Very poor diversification

The 3 months correlation between REC and Imagicaaworld is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and Imagicaaworld Entertainment Li in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imagicaaworld Entertainment and REC 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 REC Limited are associated (or correlated) with Imagicaaworld Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imagicaaworld Entertainment has no effect on the direction of REC i.e., REC and Imagicaaworld Entertainment go up and down completely randomly.

Pair Corralation between REC and Imagicaaworld Entertainment

Assuming the 90 days trading horizon REC Limited is expected to generate 0.97 times more return on investment than Imagicaaworld Entertainment. However, REC Limited is 1.03 times less risky than Imagicaaworld Entertainment. It trades about -0.1 of its potential returns per unit of risk. Imagicaaworld Entertainment Limited is currently generating about -0.14 per unit of risk. If you would invest  62,464  in REC Limited on September 3, 2024 and sell it today you would lose (9,204) from holding REC Limited or give up 14.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

REC Limited  vs.  Imagicaaworld Entertainment Li

REC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential 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.

Imagicaaworld Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imagicaaworld Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental 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.

Pair Trading with REC and Imagicaaworld Entertainment

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

The idea behind REC Limited and Imagicaaworld Entertainment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.