Correlation Between Reliance Industrial and Indian Metals

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

By analyzing existing cross correlation between Reliance Industrial Infrastructure and Indian Metals Ferro, you can compare the effects of market volatilities on Reliance Industrial and Indian Metals 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 Industrial with a short position of Indian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industrial and Indian Metals.

Diversification Opportunities for Reliance Industrial and Indian Metals

-0.06

Correlation Coefficient

Reliance Industrial  Indian Metals

Good diversification

The 3 months correlation between Reliance and Indian is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industrial Infrastruc and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Reliance Industrial 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 Industrial Infrastructure are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Reliance Industrial i.e., Reliance Industrial and Indian Metals go up and down completely randomly.

Pair Corralation between Reliance Industrial and Indian Metals

Assuming the 90 days trading horizon Reliance Industrial is expected to generate 4.73 times less return on investment than Indian Metals. But when comparing it to its historical volatility, Reliance Industrial Infrastructure is 1.11 times less risky than Indian Metals. It trades about 0.02 of its potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  25,336  in Indian Metals Ferro on September 24, 2024 and sell it today you would earn a total of  63,794  from holding Indian Metals Ferro or generate 251.79% return on investment over 90 days.

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

Reliance Industrial Infrastruc  vs.  Indian Metals Ferro

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industrial Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

Indian Metals Ferro

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industrial and Indian Metals

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

The idea behind Reliance Industrial Infrastructure and Indian Metals Ferro 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.