Correlation Between Rico Auto and Federal Bank

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

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

Diversification Opportunities for Rico Auto and Federal Bank

-0.56

Correlation Coefficient

Rico Auto  Federal Bank

Excellent diversification

The 3 months correlation between Rico and Federal is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and The Federal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Bank and Rico Auto 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 Rico Auto Industries are associated (or correlated) with Federal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Bank has no effect on the direction of Rico Auto i.e., Rico Auto and Federal Bank go up and down completely randomly.

Pair Corralation between Rico Auto and Federal Bank

Assuming the 90 days trading horizon Rico Auto Industries is expected to generate 0.97 times more return on investment than Federal Bank. However, Rico Auto Industries is 1.03 times less risky than Federal Bank. It trades about -0.13 of its potential returns per unit of risk. The Federal Bank is currently generating about -0.25 per unit of risk. If you would invest  8,823  in Rico Auto Industries on September 27, 2024 and sell it today you would lose (365.00) from holding Rico Auto Industries or give up 4.14% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  The Federal Bank

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Federal Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Rico Auto and Federal Bank

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

The idea behind Rico Auto Industries and The Federal Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.