Correlation Between Rico Auto and S P

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

Diversification Opportunities for Rico Auto and S P

0.66

Correlation Coefficient

Rico Auto  S P

Poor diversification

The 3 months correlation between Rico and SPAL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Rico Auto i.e., Rico Auto and S P go up and down completely randomly.

Pair Corralation between Rico Auto and S P

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the S P. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.56 times less risky than S P. The stock trades about -0.18 of its potential returns per unit of risk. The S P Apparels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  90,275  in S P Apparels on September 5, 2024 and sell it today you would earn a total of  4,435  from holding S P Apparels or generate 4.91% 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.  S P Apparels

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.

S P Apparels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, S P may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rico Auto and S P

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

The idea behind Rico Auto Industries and S P Apparels 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.