Correlation Between Reliance Industries and NESTE OYJ

Can any of the company-specific risk be diversified away by investing in both Reliance Industries and NESTE OYJ 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 NESTE OYJ 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 NESTE OYJ UNSPADR, you can compare the effects of market volatilities on Reliance Industries and NESTE OYJ 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 NESTE OYJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and NESTE OYJ.

Diversification Opportunities for Reliance Industries and NESTE OYJ

0.75

Correlation Coefficient

Reliance Industries  NESTE OYJ

Poor diversification

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

Pair Corralation between Reliance Industries and NESTE OYJ

Assuming the 90 days horizon Reliance Industries Limited is expected to generate 0.57 times more return on investment than NESTE OYJ. However, Reliance Industries Limited is 1.74 times less risky than NESTE OYJ. It trades about -0.15 of its potential returns per unit of risk. NESTE OYJ UNSPADR is currently generating about -0.17 per unit of risk. If you would invest  6,380  in Reliance Industries Limited on September 24, 2024 and sell it today you would lose (940.00) from holding Reliance Industries Limited or give up 14.73% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  NESTE OYJ UNSPADR

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NESTE OYJ UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESTE OYJ UNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Reliance Industries and NESTE OYJ

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

The idea behind Reliance Industries Limited and NESTE OYJ UNSPADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.