Correlation Between Rico Auto and Kewal Kiran

Can any of the company-specific risk be diversified away by investing in both Rico Auto and Kewal Kiran 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 Kewal Kiran 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 Kewal Kiran Clothing, you can compare the effects of market volatilities on Rico Auto and Kewal Kiran 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 Kewal Kiran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Kewal Kiran.

Diversification Opportunities for Rico Auto and Kewal Kiran

0.75

Correlation Coefficient

Rico Auto  Kewal Kiran

Poor diversification

The 3 months correlation between Rico and Kewal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Kewal Kiran Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kewal Kiran Clothing 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 Kewal Kiran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kewal Kiran Clothing has no effect on the direction of Rico Auto i.e., Rico Auto and Kewal Kiran go up and down completely randomly.

Pair Corralation between Rico Auto and Kewal Kiran

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the Kewal Kiran. In addition to that, Rico Auto is 1.43 times more volatile than Kewal Kiran Clothing. It trades about -0.14 of its total potential returns per unit of risk. Kewal Kiran Clothing is currently generating about 0.01 per unit of volatility. If you would invest  63,180  in Kewal Kiran Clothing on September 12, 2024 and sell it today you would earn a total of  200.00  from holding Kewal Kiran Clothing or generate 0.32% return on investment over 90 days.

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

Rico Auto Industries  vs.  Kewal Kiran Clothing

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.

Kewal Kiran Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kewal Kiran Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kewal Kiran is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rico Auto and Kewal Kiran

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

The idea behind Rico Auto Industries and Kewal Kiran Clothing 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.