Correlation Between Reliance Industries and CSB Bank

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

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

Diversification Opportunities for Reliance Industries and CSB Bank

0.59

Correlation Coefficient

Reliance Industries  CSB Bank

Very weak diversification

The 3 months correlation between Reliance and CSB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and CSB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bank Limited and Reliance Industries 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 Reliance Industries Limited are associated (or correlated) with CSB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bank Limited has no effect on the direction of Reliance Industries i.e., Reliance Industries and CSB Bank go up and down completely randomly.

Pair Corralation between Reliance Industries and CSB Bank

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 6.42 times more return on investment than CSB Bank. However, Reliance Industries is 6.42 times more volatile than CSB Bank Limited. It trades about 0.05 of its potential returns per unit of risk. CSB Bank Limited is currently generating about 0.04 per unit of risk. If you would invest  113,440  in Reliance Industries Limited on September 15, 2024 and sell it today you would earn a total of  13,845  from holding Reliance Industries Limited or generate 12.2% return on investment over 90 days.

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

Reliance Industries Limited  vs.  CSB Bank Limited

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CSB Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSB Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CSB Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Reliance Industries and CSB Bank

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

The idea behind Reliance Industries Limited and CSB Bank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.