Correlation Between ASK AUTOMOTIVE and Reliance Industries

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Can any of the company-specific risk be diversified away by investing in both ASK AUTOMOTIVE and Reliance Industries 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 ASK AUTOMOTIVE and Reliance Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASK AUTOMOTIVE LIMITED and Reliance Industries Limited, you can compare the effects of market volatilities on ASK AUTOMOTIVE and Reliance Industries 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 ASK AUTOMOTIVE with a short position of Reliance Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASK AUTOMOTIVE and Reliance Industries.

Diversification Opportunities for ASK AUTOMOTIVE and Reliance Industries

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between ASK and Reliance is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ASK AUTOMOTIVE LIMITED and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and ASK AUTOMOTIVE 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 ASK AUTOMOTIVE LIMITED are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of ASK AUTOMOTIVE i.e., ASK AUTOMOTIVE and Reliance Industries go up and down completely randomly.

Pair Corralation between ASK AUTOMOTIVE and Reliance Industries

Assuming the 90 days trading horizon ASK AUTOMOTIVE is expected to generate 3.19 times less return on investment than Reliance Industries. But when comparing it to its historical volatility, ASK AUTOMOTIVE LIMITED is 5.3 times less risky than Reliance Industries. It trades about 0.08 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  109,824  in Reliance Industries Limited on October 7, 2024 and sell it today you would earn a total of  15,291  from holding Reliance Industries Limited or generate 13.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy57.26%
ValuesDaily Returns

ASK AUTOMOTIVE LIMITED  vs.  Reliance Industries Limited

 Performance 
       Timeline  
ASK AUTOMOTIVE 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ASK AUTOMOTIVE LIMITED are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, ASK AUTOMOTIVE displayed solid returns over the last few months and may actually be approaching a breakup point.
Reliance Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ASK AUTOMOTIVE and Reliance Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASK AUTOMOTIVE and Reliance Industries

The main advantage of trading using opposite ASK AUTOMOTIVE and Reliance Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASK AUTOMOTIVE position performs unexpectedly, Reliance Industries 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 Reliance Industries will offset losses from the drop in Reliance Industries' long position.
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The idea behind ASK AUTOMOTIVE LIMITED and Reliance Industries Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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